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ISSN 2285–3332 www.annals.seap.usv.ro
ISSN-L 2285–3332
On-line ISSN 2344-3847
Revistă ştiinţifică indexată în baze
de date internaţionale
Editura Universităţii “Ştefan cel Mare” din Suceava
Editor-in-chief: Carmen NĂSTASE Executive editor: Adrian Liviu SCUTARIU Editors: Elena HLACIUC, Carmen CHAŞOVSCHI, Florin BOGHEAN, Mariana LUPAN, Eugenia IANCU, Simona BUTA
Angela ALBU, „Ştefan cel Mare” University of Suceava, Romania Paolo ANDREI, University of Studies in Parma, Italy Stefano AZZALI, University of Studies in Parma, Italiy 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 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 Manuela Rodica GOGONEA, Academy of Economic Studies, Bucuresti, Romania 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 Mariana LUPAN, „Ştefan cel Mare” University of Suceava, Romania Alunica MORARIU, „Ştefan cel Mare” University of Suceava, Romania Carmen NĂSTASE, „Ştefan cel Mare” University of Suceava, Roman ia Alexandru NEDELEA, „Ştefan cel Mare” University of Suceava, Romania Abraham PIZAM, University of Central Florida, Orlando, Florida Ion POHOAŢĂ, „Alexandru Ioan Cuza” University of Iaşi, Romania Ionuț POPA, Academy of Economic Studies, Bucharest , Romania Gabriela PRELIPCEAN, „Ştefan cel Mare” University of Suceava, Romania Petru SANDU, Elizabethtown College, Pennsylvania, USA Adrian Liviu SCUTARIU, „Ştefan cel Mare” University of Suceava, Romania Doru TILIUŢE, „Ştefan cel Mare” University of Suceava, Romania Viorel ŢURCANU, ASEM, Chişinău, Republic of Moldova Diego VARELA PEDREIRA, University of A Coruna, Spain Răzvan VIORESCU, „Ştefan cel Mare” University of Suceava, Romania Marian ZAHARIA, Petroleum-Gas University of Ploiești, Romania
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JOB DISCRIMINATION AGAINST WOMEN AND ENDOGENOUS POPULATION CHANGE IN A GENERALIZED SOLOW GROWTH MODEL
WEI-BIN ZHANG
THE VEGETATION FROM THE SUPERIOR BASIN OF MOLDOVA, SUPPORT FOR SUSTAINABLE TOURISM DEVELOPMENT
PETRE SPÂNU CONSTANTIN COCERHAN CARMEN NASTASE
CURRENT ISSUES REGARDING THE PROTECTION OF RETAIL INVESTORS ON THE CAPITAL MARKET WITHIN THE EUROPEAN UNION
CORINA ENE AN EMPIRICAL ANALYSE OF THE CORRELATION BETWEEN INNOVATION PERFORMANCE AND ECONOMIC DEVELOPMENT
VIORELA IACOVOIU ADRIAN STANCU
THE MOTIVATIONAL PROCESS ACROSS CULTURES: EXPERIMENT ON MOROCCAN & UKRAINIAN SUBJECTS
CARMEN NASTASE TOURIA NEGGADY ALAMI ZAKARIA AIT TALEB
THE RATIONAL ACTOR MODEL CHANGES IN PUBLIC ADMINISTRATION WITHIN THE YEARS 2013 -2016: A CASE STUDY
DORINA ȚICU ECO-MARKETING TRENDS OF HOTEL INDUSTRY DEVELOPMENT IN UKRAINE
OLHA DANILOVA NATALY ZABLOTOVSKA INNA PASHANIUK
FEATURES OF INNOVATIVE MANAGEMENT OF REFORMATORY CHANGES IN SYSTEM OF THE LAND RELATIONS
TATYANA ZAVOLICHNA IRYNA ZRYBNIEVA
WELLNESS TOURISM IN 4 AND 5 STARS ACCOMMODATION UNITS IN ROMANIA
CLAUDIA CIOBANU (BITEA)
THE C.A.N.O.A. MODEL - A POSSIBLE IMPLEMENTATION IN ROMANIAN UNIVERSITIES
ELENA HLACIUC MARIAN SOCOLIUC GEANINA MĂCIUCĂ RODICA AILOAIE
COMPUTER MODELING OF FINANCIAL INFORMATION FOR BUSINESS PLANS (XBRL - EXTENSIBLE BUSINESS REPORTING LANGUAGE)
VALERIU LUPU EMERGING FINANCIAL SECTOR OF ROMANIA: A REVIEW
R. MALAR MOZHI ALEXANDRU-MIRCEA NEDELEA
THE STAGES OF ESTABLISHMENT AND DEVELOPMENT OF FINANCIAL MANAGEMENT
ROMAN GRESHKO VIOLETTA KHARABARA
THE CREDIT INFLUENCE ON THE ECONOMIC GROWTH IN ROMANIA
GHEORGHE MOROŞAN IULIAN CONDRATOV AURICA TRANDAFIRA SOFIAN
PUBLIC EXPENDITURE ON HEALTH IN LOCAL BUDGETS
CRISTINEL ICHIM THE MODEL OF UNIVERSAL BANKING SUPERMARKET IN UKRAINE
TATIANA MANOLIEVNA GORDITSA FISCAL RULES AND FISCAL RESPONSIBILITY CONVERGENCE
ANCA FLORENTINA GAVRILUŢĂ (VATAMANU)
USING ARIMA IN ROBOR EVOLUTION MODELLING
MARIAN ZAHARIA ANIELA BĂLĂCESCU
GAMIFICATION. SOLUTIONS DEDICATED TO TOURISM INDUSTRY AND THEIR USE IN ROMANIA
MIHAELA FILOFTEIA S. TUTUNEA
CONSTITUTIONAL INTERPRETATION OF ROMANIA: POST MODERNITY
P. RATHNASWAMY MARILENA-OANA NEDELEA
THE IMPORTANCE OF AUTONOMY AND RESOURCES FOR SUPPORTING THE LOCAL GOVERNMENT EFFICIENCY
PETRONELA SCUTARIU THE MANAGEMENT OF ATYPICAL RELATIONSHIP BETWEEN DAY LABORERS AND BENEFICIARIES
CRISTINA MARIA BĂLĂNEASA INTERNATIONAL LABOUR LAW PRINCIPLES AS GUIDELINES TO FOSTEREMPLOYMENT RELATIONS
ANIKO NOEMI TURI THE RIGHT TO GOOD ADMINISTRATION IN THE COURT OF JUSTICE OF THE EUROPEAN UNION CASE LAW
ELISABETA SLABU
Prof. Wei-Bin ZHANG
Ritsumeikan Asia Pacific University, Japan
Abstract:
This study examines economic growth and population change with discrimination against women in the labor market
within the analytical framework of Solow’s neoclassical growth model. The study models dynamic interactions between
wealth accumulation, time distribution between work, children caring, and leisure, population change with endogenous
birth and mortality rates with gender discrimination. The production technology and markets are built on Solow’s
neoclassical growth model. The basic mechanisms for population changes in the Barro-Becker fertility choice model and the
Haavelmo population model are integrated to model the population change. This study also takes account of discrimination
against woman in the labor market. We synthesize these dynamic forces in a compact framework by applying Zhang’s utility
function. The model properties are studied by simulation. We find equilibrium points and illustrate motion of the dynamic
system. We also examine the effects of changes in the discrimination against woman, the propensity to save, woman’s
propensity to pursue leisure activities, the propensity to have children, woman’s human capital and man’s emotional
involvement in children caring.
Key words: gender discrimination; birth and mortality rates; propensity to have children; gender difference in time
distribution; population growth; wealth accumulation
Acknowledgements: The author thanks the financial support from the Grants-in-Aid for Scientific Research (C),
Project No. 25380246, Japan Society for the Promotion of Science.
1. INTRODUCTION
Since the publication of An Essay on the Principle of Population in 1798, economists proposed
different ideas about interdependence between population change and economic growth. In the last two
hundred years, economies in different parts of the world have experienced different patterns of
population changes. These changes include, for instance, rapid aging, raising life expectancies, and
falling fertility rates in industrialized economies. This study deals with dynamic interactions between
wealth accumulation and population dynamics with birth rate, mortality rate and gender discrimination
against women. The unique contribution of this study is through introducing gender discrimination in
labor market we demonstrate the role of the discrimination in time distribution and population
dynamics.
This paper introduces population growth with endogenous birth and mortality rates into Solow’s
neoclassical one sector growth model with gender discrimination. The economic production and
markets are the same as modelled in neoclassical growth theory. The seminal paper in the field is the
Solow model (Solow, 1956; and Burmeister and Dobell, 1970). Neoclassical growth theory studies
endogenous physical capital or wealth accumulation in perfectly competitive markets (see, for
instance, Azariadis, 1993; and Barro and Sala-i-Martin, 1995). Our model is constructed on the basis of
neoclassical growth theory. We model economic production and wealth accumulation within the
framework of the Solow model. However, household behavior is modelled by applying Zhang’s
(Zhang, 1993).
Population change rate is the net result of birth and mortality rates. One finds many factors in the
literature of population dynamics which are supposed to be related to birth rates (Barro and Becker,
1989; Galor and Weil, 1996; Adsera, 2005; Chu et al., 2012; Hock and Weil, 2012). According to
Becker et al. (1990), it is very costly to bring up children to adulthood and to provide them education.
There are quality-quantity trade-offs on children. For instance, Galor and Weil (1999) and Doepke
(2004) argue that the transition of economies from a stage of stagnation to perpetual growth may be
strongly affected quality-quantity trade-offs on children. In a study by Bosi and Seegmuller (2012)
heterogeneity of households is examined in terms of capital endowments, mortality, and costs per
surviving child. Varvarigos and Zakaria (2013) study interdependence between fertility choice and
expenditures on health. Their model is influenced by the studies on fertility and health expenditures
by Bhattacharya and Qiao (2007) and Manuelli and Seshadri (2009). According to Varvarigos and
Zakaria predicts one may find a fall in fertility in association with the process of economic growth.
There are many other models on dynamics of mortality rates (e.g., Kirk, 1996; Ehrlich and Lui
1997; Acemoglu and Johnson, 2007; Strulik, 2008; Galor, 2012). Aging is another important topic in
modern economics. For a given population structure, aging population and mortality rate are closely
related. It is thus significant to understand social and economic mechanisms of mortality (Cigno and
Rosati, 1996; Robinson and Srinivasan, 1997; Schultz, 1993, 1998; Blackburn and Cipriani, 2002;
Chakraborty, 2004; Hazan and Zoabi, 2006; Heijdra and Romp, 2008; Ludwig and Vogel, 2009; Lee
and Mason, 2010; Balestra and Dottori, 2012; Lancia and Prarolo, 2012; and Ludwig et al., 2012).
Zhang (2014) builds a dynamic model of population change under influences of these studies. This
study bases Zhang’s model in describing the population dynamics.
To explain birth and mortality rates we need to take account of gender differences in behaviour.
As Flabbi (2010: 745) argues: “Even if wages and earnings for women and men in the United States
have experienced a significant convergence in the 1970s and 1980s, their ratio has remained
roughly constant at 75% since the mid-1990s… The United States is not an exception among
OECD countries: they rank more or less average, with Northern European countries traditionally
showing the lowest differentials and Japan the highest. These differentials persist after conditioning
on observable productivity characteristics… .” This study is to address issues related to how
discrimination against women may affect population. Becker (1957) points out that in association
with more intensive competition in production, one might expect that costly discrimination will
become weaker. According to Black and Brainerd (2004: 541), “The recent narrowing of the gender
earnings gap in an era of increased competition through international trade and deregulation might
seem to offer support for this theory. Since 1960, the time trend for the female: male wage ratio has
closely tracked that for imports as a share of GDP, with both series remaining fairly constant
between 1960 and 1980, then increasing dramatically through the early 1990s”. Endogenous
preferences should help to explain complicated patterns of gender division of time (e.g., Goodfriend
and McDermott, 1995; Kelly, 1997; Antecol, 2000; Edmonds and Pavcnik, 2006). This study
incorporates gender discrimination issues, gender differences in time distributions. The model is to
integrate Zhang’s two models. Zhang (2014) develops a model of economic growth with a constant
population and gender division of labor and discrimination against women in labor market. This paper
introduces into this model. Zhang (2015) develops a growth model with endogenous birth and
mortality rates and endogenous population. This study proposes a model to reveal interdependence
between population growth and discrimination against women by synthesizing the two models in a
compact framework. The paper is organized as follows. In Section 2 we develop the basic model with
endogenous wealth and population. In Section 3 we simulate the model. In Section 4 we make
comparative dynamic analysis with regard to some parameters. In Section 5 we conclude the study.
2. THE BASIC MODEL
We follow the Solow growth model in describing the production sector (Solow, 1956). Markets
are perfectly competitive. The economy has a single production sector. There is a single commodity
which is used for consumption and investment. Capital depreciates at a constant exponential rate .k
which is independent of the manner of use. Technology of production sector is constant returns to
scale. Factors are inelastically supplied and the available factors are fully utilized at every moment.
Saving is made by households. Assets of the economy are owned by households. All their incomes are
spent on consumption, saving, and child bearing. The population is composed of male and female
populations. Each gender’s adult and young populations are homogeneous. A family is composed of
consists of husband, wife and children. All the families are identical. Subscript indexes 1q and
2q are used to represent man and woman respectively. The variable tN represents the adult
population of each gender. We use tTq and tTq to represent work time and time spent on taking
care of children of gender .q Let tN represent the total labor supply employed in time t for
production. We use tNq to represent the qualified labor force of gender .q We have
,, 11 tNtNtNtNtThtN qqq (1)
where qh is gender sq' level of human capital.
The production sector
The production sector employs two inputs - capital and labor. We use tK and tF to
represent capital stock and output level. The production function specified as
,1,0,, tNtKAtF (2)
Where and are respectively the constant output elasticities of capital and qualified labor input
and A is the total factor productivity. Labor and capital are paid their marginal products. Firms earn
zero profits. Let tw stand for the wage rate of per unit of qualified work time in fair labor market
where workers earn their marginal value of labor. Nevertheless, there is gender discrimination in labor
market (e.g., Heyman, et al. 2013; Jonathan and Kerwin, 2013; Lanning, 2014). We describe
discrimination on the basis of Zhang (2014). There is a fraction of women’s fair share of the
gender’s labor taken away by firms from women. The rate is called the discrimination rate against
woman. As observed by Dozier et al. (2013: 13): “Gender discrimination cannot be measured by
directly asking respondents in a survey if they systematically discriminate against women with
regard to salaries. Since such conduct is illegal, that question would yield only normative responses.
Thus, we are left with the somewhat unsatisfactory methodology of testing any variables that might
mediate the relationship between gender and income. We treat the residual variance as a quantified
estimate of gender discrimination.” As demonstrated later on, by comparative dynamic analysis we
can get some insights into possible effects of the discrimination rate.
The total cost of the female labor force due to discrimination is tNtTh 22 . The production
sector’s profit is given as follows
,1 2211 tNtThtwtNtThtwtKtrtF k
The marginal conditions imply
,,, 22
11
tN
tFhtw
tN
tFhtw
tK
tFtr k
(3)
where twq is the wage rate of per unit of work time by gender q
.1, 2211 htwtwhtwtw
The current and disposable incomes
We apply Zhang’s approach to modelling consumer behaviour (Zhang, 1993). There are five
variables for the representative household to decide: consumption level of commodity, leisure time,
work time, number of children, and saving. Variable tk stands for wealth per household, i.e.,
./ tNtKtk We have the representative household’s current income ty from the interest and
wage payments as follows
.2211 tTtwtTtwtktrty
The representative household can also sue the value of .tk Selling and buying wealth are assumed to
conducted instantaneously without any transaction cost. This assumption is evidently strict, but enables
to solve households’ decision problem. The representative household’s disposable income is the sum
of the current income and the value of wealth
.ˆ tktyty (4)
The cost of children caring
We use tn and tpb to represent the birth rate and the cost of birth at time. Many factors are
found to be related to costs of bringing up children. As in Zhang (2014), it is assumed that children
have the same level of wealth as that of parent. Parents spend time and the following cost on their
children
.tktntpb (5)
It should be remarked that Barro and Becker (1989) include consumption of goods as a part of the cost.
Becker (1981) takes account of costs of the mother’s time spent on rearing children to adulthood. This
study proposes a relation between fertility rate and the parent’s time on raising children as follows
.0, qqq tntT (6)
The relation implies that the more the parents want children, the more they spend time on child caring.
We do not possible changeable return to scales.
The budget and time constraint
The total available budget is between saving, ,ts consumption of goods, ,tc and bearing
children, .tpb We express the budget constraint as follows
.ˆ tytntktstctp (7)
In addition to work and child caring, parents have their own leisure time. We denote the leisure time of
gender q by .~
tTq 0T is used to stand for the available time for work, children caring leisure, and
leisure. Each worker has time constraint as follows
.~
0TtTtTtT qqq (8)
Insert (8) in (7)
,~~
22112211 tytwtTtwtTtwtTtwtTtntktstctp
(9)
where .1 021 Ttwtwtktrty
We consider ty as “potential” income which the family can have if they spend all the available time
on work. The left-hand side of (9) means the sum of the consumption cost, opportunity cost of leisure,
saving, and opportunity cost of bearing children. Insert (6) in (9)
,~~~
2211 tytwtTtwtTtntwtstc (10)
where
.1,~2211 hhhtwhtktw
The opportunity cost of children fostering is given by tw~ .
The utility and optimal behavior
We follow Barro and Becker (1989) in that that the parents’ utility is assumed to be dependent
on the number of children. Following Zhang (2015), the utility is a function of ,tc ,ts ,~
tTq and
tn
,~~
0020100
21 tntTtTtstctU
where 0 is the propensity to consume, q0 the gender sq' propensity to use leisure time, 0 the propensity
to have wealth, and 0 the propensity to have children. Maximizing the utility subject to the budget constraint
yields
,~,~
,,tw
tytn
tw
tytTtytstytc
q
q
q
(11)
where
.1
,,,,0201000
0000
Population change with endogenous birth and mortality rates
We use tn and td to stand for the birth rate and mortality rate, respectively. The population
change rate is birth rate minus mortality rate
,tNtdtntN (12)
The birth rate is determined by (11). On the basis of different approaches in the literature of economic
growth with endogenous population (e.g., Haavelmo, 1954; Razin and Ben-Zion, 1975; Stutzer, 1980;
Yip and Zhang, 1997; Chu et al., 2012), Zhang applies the following equation
,
ty
tNtd
a
b (13)
where ,0 .0a We call the mortality rate parameter. Equation (13) implies that mortality rate
is negatively related to the disposable income. As in the Haavelmo model, people live longer in
association with improvements in living conditions. In (13) tN b means possible influences of the
population on mortality. There are different possible influences. For instance, if environment
deteriorates and the population is overpopulated, more people will cause higher mortality. This implies
that b is positive. The sign of b is generally ambiguous as the population may have a positive or
negative effect on mortality. Insert (10) and (13) in (12)
.~ tNty
tN
tw
tytN
a
b
(14)
Wealth dynamics
The change in the household’s wealth is saving minus dissaving. We thus have
.tktytktstk
(15)
Demand and supply of goods
Output of the production sector equals for the net savings and the depreciation of capital stock.
We have
,tFtKtKtCtS k (16)
where tKtKtS k is the sum of the net saving and depreciation and
.,, tNtktKtNtctCtNtstS
We built the model with gender discrimination. The model is general as some well-known models,
such as the Solow model and the Haavelmo model, can be treated as its special cases.
3. ANALYZING DYNAMIC PROPERTIES OF THE MODEL
This section examines dynamics of the model. We define a new variable
./ twtrtz k
Lemma
We have the motion of the economy with the following two differential equations
,,~
tNtztz z
,,~
tNtztN N (17)
in which z
~ and
N~
are functions of tz and tN given in the Appendix. All the other variables
are given as functions of tz and tN at any point in time as follows: tk by (A11) → tr and
twq by (A2) → tN by (A16) → ty by (A3) → ,tc ,ts ,
~tTq and tn by (11) → tTq
by
(6) → tTq by (A4) → tK by (A1) → tF by (2).
We have two variables tz and tN and two differential equations. The Appendix shows
that the expressions of the two differential equations are very complicated. We simulate the model
to plot the motion of the economy. First, we specify 05.0k and let .240 T We specify the
other parameters as follows
.2.0,1,5,2,6.2,3
,5.0,4.0,1,15.0,15.0,4.0,2.0,6.0,34.0
2121
1010000
hh
baAv
(18)
The discrimination rate is .2.0 We fix the propensity to save 6.0 and the propensity to consume
.3.0 The total productivity factor is .1A We assume that the father spends less hours in children
fostering than the mother. The parents have the equal propensity to enjoy leisure. The male
population has higher human capital than the female population. It should be noted that in the
literature of empirical studies on growth, the value of the parameter, , in the Cobb-Douglas
production is often fixed near 3.0 (see, for instance, Miles and Scott, 2005; and Abel et al, 2007). To
plot the motion of the economy, we choose the following initial conditions
.210,6.10 Nz
Figure 1 shows the simulation result. The population falls from its high initial value. Both the
birth rate and mortality rate become lower. The wealth rises initially and falls in the long term. The
labor force is reduced. The wage rates are enhanced and rate of interest is reduced. The wealth per
household and opportunity cost of children fostering are increased. The parents’ leisure hours are
increased. The falling in birth rate is associated with falling in the parents’ time of children
fostering. As the income rises, the parents work less hours. The national wealth and output are
reduced in association with falling capital and labor force. The consumption level and the
representative household’s wealth rise.
10 20 30
0.59
0.602
0.614
0 10 20 30
20.2
20.6
21
10 20 30
318
319.5
321
10 20 30
920
950
980
10 20 30
636
648
670
0 10 20 30
0.63
0.65
0.67
0 10 20 30
1
1.2
1.4
10 20 30
60
66
72
10 20 30
20.5
21
21.5
0 10 20 304
8
12
0 10 20 3011
14
17
10 20 30
1.4
2.2
3
Figure 1. The Motion of the Economic System
We can show that the system becomes stationary in the long run. Simulation confirms that the
system has an equilibrium point. The equilibrium values of the variables are listed as follows
,62.0,59.0,6.885,3.1260,49.446,73.23 rdnFNKN
,8.18~
,3.12~
,3.2,6.11,4.78,89~,11.1,86.1 212121 TTTTkwww
n
F
c
r k
2
~T
N
2T t
N K
1w w~
t t t
t
t
t t t
1T
1
~T
1T
2T
2w
d
t t t
.1.26,93.2,17.1 21 cTT
The system’s two eigenvalues at the equilibrium point are: 393.0 and .369.0 As the two
eigenvalues are negative, the unique equilibrium is locally stable. Hence, the system always
approaches its equilibrium point if it is not far from the equilibrium point.
4. COMPARATIVE DYNAMIC ANALYSIS
The motion of the national economy was plotted under (18). It is significant to carry out
comparative dynamic analysis as parameters are changeable and changes in a parameter has transitory
and long-run impact. The Lemma in the previous section gives the computational procedure to
calibrate the movement of the economy. This implies that we can study the transitory and long-run
effects of change in any parameter. We introduce a variable tx to represent the change rate of the
variable tx in percentage due to changes in the parameter value.
4.1. The discrimination rate against woman rises
As mentioned in Zhang (2014), there are different ways of discrimination against women.
Boserup (1970) holds that economic growth and the status of women should exhibit a curvilinear
relationship. According to Boserup, there is a widening gap between men and women in initial stages
of economic growth. In their empirical research on rural Bangladesh’s patterns of women’s work and
determinants of the gender division of labor in, Bose et al. (2009) find that the gender division of labor
is determined both by economic and socio-cultural factors. Nevertheless, few formal models take
accord of gender discrimination in the literature of economic development. We now increase the
discrimination rate against women in the following way: .25.02.0: Man’s wage rate is increased
and woman’s wage rate is reduced. The opportunity cost of children caring is reduced. As a
consequence of strengthened discrimination, the wife works less hours has more leisure hours and
the husband works more hours and less leisure hours. The wife and husband increase children
fostering time initially and reduce fostering time in the long term. Both birth and mortality rates are
increased initially and are reduced in the long term. The population is reduced. The qualified labor
force rises initially and falls in the long term. Both consumption and wealth levels are reduced. The
rate of interest falls. The output rises initially and falls in the long term.
10 20 300.5
0.8
2.110 20 30
3.4
1.7
0
10 20 30
1.6
2.3
3
10 20 30
2
0.5
3
10 20 301
1
3
10 20 30
2.4
1.2
0
10 20 30
6
3
0
10 20 30
7
5
3
0 10 20 30
5.4
4.2
3
10 20 30
8
1
6
10 20 30
6
2
2
10 20 30
0.6
0.1
0.8
Figure 2. Stronger Discrimination against Women
t
n N N
F
K
r
1w
c
w~
1
~T
1T
t
t
t
t
t
t
t
t
2T
2
~T
2T
1T
k
2w
d
t
t t
4.2. Woman’s human capital being improved
According to the traditional neoclassical approach gender inequalities due to disparities in human
capital will wither away when an economy has high economic growth (e.g., Beneria and Feldman,
1992; Truong, 1997; Forsythe, et al. 2000; Dolado, et al. 2001; Duflo, 2012). Stotsky (2006: 18) holds
“the neoclassical approach examines the simultaneous interaction of economic development and the
reduction of gender inequalities. It sees the process of economic development leading to the reduction
of these inequalities and also inequalities hindering economic development.” Although this study
assumes human capital exogenous, we can fully describe a change in human capital on the economic
system. We now enhance the mother’s human capital as follows: .8.26.2:2 h The results are
plotted in Figure 3. As the mother accumulates more human capital, her wage income is increased. As
the mother earns more per unit time, she works more and has less leisure time. The opportunity cost of
child fostering is increased as the mother’s wage rises. The father’s wage is slightly affected. The
father works less and stays longer at home. Both the mother and father shorten time of children
fostering. The family consumes more goods and owns more wealth. The parameter change enhances
the capital, total labor input and output. The mortality rate is reduced as living conditions are improved.
The net impact of falling birth and mortality rates augments the population. It should be noted that
some researches find positive interdependence between life expectancy and the aggregate human
capital level (e.g., Blackburn and Cipriani, 2002; Boucekkine et al., 2002). Our result also
demonstrates the same trend if we consider the mortality rate negatively related to the life expectancy.
The positive population growth has relatively weak impact on the birth rate. If woman’s human capital
and preference for leisure are increased simultaneously, the birth rate may fall faster than the mortality
rate. If this happens, then the population will fall.
10 20 301.2
0.7
0.2
0 10 20 30
0.2
1.1
2
10 20 30
4.5
5.5
6.5
10 20 30
4.5
5.3
6.1
0 10 20 30
4.5
5.5
6.5
10 20 30
0.25
0.15
0.05
0 10 20 30
1
4.5
8
0 10 20 30
2.7
3.05
3.4
0 10 20 30
2.84
2.97
3.1
10 20 300.2
7.5
15.2
10 20 30
4
1
2
10 20 30
0.26
0.2
0.14
Figure 3. A Rise in Woman’s Human Capital Being Improved
4.3. A rise in the propensity to save
The Solow model predicts that a rise the propensity to save brings about an increase in per capita
wealth but lowers per capita consumption level. The population growth rate is not affected by
economic conditions in the traditional one-sector neoclassical growth model. We now study effects of
saving propensity on population dynamics. We allow the propensity to save to be changed as follows:
.63.06.0:0 The results are plotted in Figure 4. The family’s wealth is increased in association
with the rise in the propensity to save. This increases the opportunity cost of children caring. The wage
rates are increased. The rise in the cost reduces the birth rate. Less children means less time spent on
children caring. Woman and man have work less hours. Woman and man have less leisure time
initially and more in the long term. Both the mother and father spend less hours in children caring. The
t
n N N
F
K
r 1w
c
w~
1
~T 1T
t t
t
t
t
t
t
t 2T
2
~T
2T
1T
k
2w
d
t t t
population falls as a consequence of falling in the birth and mortality rates. The output and total labor
input are reduced in the long term. The national wealth rises.
10 20 30
3
1.7
0.4 10 20 30
3.5
2
0.5
10 20 30
1.6
2.3
3
10 20 30
3
0
3
10 20 301
1
3
10 20 30
3
1.5
0
10 20 30
0.3
0.9
1.5
10 20 30
1
3
5
10 20 30
1.5
0
1.5
10 20 30
0.5
3.5
6.5
10 20 30
1.6
0.8
0
10 20 30
2.7
2.2
1.7
Figure 4. A Rise in the Propensity to Save
4.4. Woman’s propensity to enjoy leisure rises
Woman may have different preferences in different stages of economic development. We now
study the following rise in women’s propensity to enjoy leisure, .16.015.0:02 The rise in
women’s preference results in that women stay more hours at home and work less hours. Men have
less leisure hours and work more hours. The parents have less hours for children fostering. The wage
rates are increased. The consumption level, wealth, and opportunity cost of children fostering fall.
The birth rate is reduced. The mortality rate is augmented initially but is reduced in the long term.
The population, total labor, wealth and output fall.
10 20 300.2
0.3
0.8
10 20 30
1.6
0.8
0
10 20 30
2.8
2.3
1.8
10 20 30
3.6
2.8
2
10 20 30
3.5
2.7
1.910 20 30
0.6
0.3
0
10 20 30
0.04
0.17
0.3
10 20 30
2.8
2.3
1.8
10 20 30
2.5
2.25
2
10 20 30
15
7
1
10 20 302
1
4
10 20 30
0.29
0.12
0.05
Figure 5. Woman’s Propensity to Enjoy Leisure Rises
4.5. An increase in the propensity to have children
The traditional neoclassical growth theory holds that as a national economy is characterized of
constant returns to scale, a rise in the population tends to have no impact on per household’s living
conditions, even though the values of the aggregated variables are affected. Although our model is
developed within the neoclassical framework, this study makes the population endogenous. We study
the case that the propensity to have children is increased as follows: .42.04.0:0 The simulation
t
n N
N
F
K
r
1w
c
w~
1
~T
1T
t t
t
t
t
t
t
t 2T
2
~T
2T
1T
k
2w
d
t
t
t
t
n N
N
F
K
r
1w
c
w~
1
~T 1T
t t
t
t
t
t t
t
2T
2
~T
2T
1T
k 2w
d
t
t t
results are plotted in Figure 6. The birth rate and the population rise. The increased population leads to
a fall in the mortality initially. In the long term the birth and mortality rates rise. A rise in the
propensity to have children have a great impact on the population growth. The capital, total labor input
and output level are all reduced initially and enhanced in the long term. As the family has more
children, the parents spend more time on children caring. They initially increase their leisure time as
they reduce labor hours. Nevertheless, as they wage rates are reduced in the long term, the falling rates
in labor time are lowered. More children imply less consumption in the long term. As the change rate
of capital is lower than the output, the rate of interest is increased over time. The opportunity cost of
children w~ and the representative household’s wealth fall in the long term.
10 20 301
2
5
10 20 300
4
8
10 20 30
4
1
2
10 20 304
2
8
10 20 30
4
1
6
10 20 300
2
410 20 30
2
1
0
10 20 302
1
4
10 20 30
2
0
210 20 30
8
4
0
10 20 300.6
0.7
2
0 10 20 30
2.6
3.8
5
Figure 6. An Increase in the Propensity to Have Children
4.6. The father spending more time on each child fostering
We now consider that the father wants to spend more time with each of his children. We increase
the parameter as follows: .2.22:1 The father’s time on children caring is increased and the
mother’s time is slightly reduced. The parents spend less hours on leisure. The mother works more
hours and the father works less hours. The wage incomes are enhanced for the father and the
mother. The opportunity cost of children fostering is increased in the long term. The wealth per
household is reduced. The population and the mortality rate fall. The rate of interest falls. The total
wealth, total labor input and output fall. The family consumes less.
10 20 30
0.4
0.1
0.210 20 30
0.8
0.4
0
10 20 30
0.5
0.2
0.1
10 20 30
1
0.5
0
10 20 30
0.8
0.4
010 20 30
0.36
0.18
0
10 20 300
0.08
0.16
10 20 30
0.8
0.3
0.2
10 20 30
0.5
0.3
0.1
10 20 300.5
0.5
1.5
0 10 20 30
0.48
0.4
0.32
10 20 300
5
10
Figure 7. The Father Spending More Time on Each Child Fostering
t
n N N
F
K
r
1w
c
w~
1
~T
1T
t
t
t
t
t
t
t t
2T
2
~T 2T
1T
k
2w
d
t
t
t
t
n N N
F
K
r
1w
c
w~
1
~T 1T
t
t
t
t
t
t t t 2T
2
~T
2T
1T
k 2w
d t
t t
4.7. A rise in the total factor productivity
The total factor productivity rises as follows: .05.11: A The change in productivity
enhances the output level and wage rates. The wealth per household and opportunity cost fall
initially and increase in the long term. The birth rate is increased and the mortality rate is reduced in
the short term. In the long term the birth and mortality rates slightly change. The long-run time
distributions change slightly. The national wealth, the population, the labor input, and national
output rise.
10 20 300.4
1.3
3
0 10 20 300
3
6
0 10 20 30
6
10
14
0 10 20 30
4
5
6
0 10 20 30
10
12
14
0 10 20 30
1
3
5
0 10 20 30
5.5
6.5
7.5
10 20 302
3
8
0 10 20 30
2
4.5
7
0 10 20 30
0
4
8
10 20 30
3
1.5
0
0 10 20 30
0
1.5
3
Figure 8. A Rise in the Total Factor Productivity
5. CONCLUDING REMARKS
This study is concerned with economic growth and population change with discrimination
against women in the labor market within the analytical framework of the Solow neoclassical growth
model. The study built a dynamic model of interdependence between population change with
endogenous birth and mortality rates, wealth accumulation, and time distribution between work, leisure
and children caring. We built the model on the basis of the Solow growth model, the Haavelmo growth
model with endogenous population and the Barro-Becker growth model with endogenous fertility
choice. This study also takes account of discrimination against woman in the labor market. We
synthesized these determinants of population growth in a compact framework by applying Zhang’s
utility function proposed by Zhang. The model is simulated for identifying existence of equilibrium
points and for plotting motion of the system. We also examined the effects of changes in the
discrimination against woman, the propensity to save, the propensity to have children, woman’s
propensity to pursue leisure activities, woman’s human capital and man’s emotional involvement in
children caring. For instance, when the discrimination rate against women is increased, we have the
following changes in the dynamic process: man’s wage rate is increased and woman’s wage rate is
reduced; the opportunity cost of children caring is reduced; the wife works less hours has more
leisure hours and the husband works more hours and less leisure hours; the wife and husband
increase children fostering time initially and reduce fostering time in the long term; both birth and
mortality rates are increased initially and are reduced in the long term; the population and
consumption and wealth levels are reduced; the qualified labor force rises initially and falls in the
long term; the rate of interest falls; and the output rises initially and falls in the long term. There are
many ways to generalize and extend our model. An obvious limitation of our model is that children
caring function exhibits constant return to scale in the parent’s time spent on children caring. It is
possible to generalize our model by using more general utility or production functions. Our research
may also be extended and generalized to study some observed phenomena related to gender, human
capital and economic development.
t
n N N
F
K
r
1w
c
w~
1
~T 1T
t t
t
t
t
t
t
t 2T
2
~T
2T
1T
k 2w
d t t t
APPENDIX: CHECKING THE LEMMA
We show to present the dynamics with two differential equations. From equation (3), we obtain
,~
K
N
w
rz k
(A1)
where ./~ Inserting (A1) in (2) and (3) yields
.1,,~
,~ 2211 hwwhwwz
Awz
Ar k
(A2)
We treat ,r w and qw as functions of .z The definition of y and (3) imply
,1 0 whkry (A3)
where .1 0210 Thhh Use (8) and (11)
.~~
00 yww
TTTTTq
qqq
(A4)
Insert (A3) in (A4)
,~
~
krw
rkrT q
(A5)
where
.1
,,1~, 0
0
0
q
q
qqqqq
q
q
qw
rrwhrrr
w
whT
Insert (A5) in (1)
,~~
~
00
2211 krw
hkrThTh
N
N
(A6)
where
.~,,~~~, 221102211022112211 rhrhrrhrhhrhrhrhh
From (16) we have
,N
Fky (A7)
where and .1 k Insert (A3) and (3) in (A7)
.0
N
Nwwhkr (A8)
Insert (A6) in (A8)
.0~
~~
00
0
h
w
hkrkr
w
r (A9)
From whkw ~ and (A9), we have
,0~~21
2 mkmk (A10)
where
.~~
,~~,~
~~~
0
002
001
rw
rzm
m
whhhzm
m
rhwhrhrzm
We solve (A10), treating k as the variable
.2
~4~~2
2
11 mmmzk
(A11)
From (A11) k as determined a function of .z We use the following procedure to determine the
variables as functions of z and :N k by (A11) → r and qw by (A2) → N by (A16) → y by
(A3) → ,c ,s ,~qT and n by (11) → qT by (6) → qT by (A4) → K by (A1) → F by (2). From this
procedure and (14), we represent the motion of the population as a function of tz and tN at any
point in time
.,~
NztN N (A12)
We already knew that k and y are functions of .z Equation (15) implies
.0 kyzk (A13)
Insert tk from (A11) in (A13)
.~
1
0
zd
kdzzz z (A14)
We confirmed the lemma.
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Petre SPÂNU
Doctoral School „Simion Mehedinti”, Faculty of Geography, University of Bucharest, Romania [email protected]
Constantin COCERHAN
Mihai Eminescu National College, Suceava, Romania [email protected]
Carmen NASTASE
Faculty of Economics and Public Administration, Ștefan cel Mare University of Suceava, Romania [email protected]
Abstract:
Through this study based on specialized documentaries and field research, we are looking for the promotion
of the bio geographical potential of the Superior Basin of Moldova in which the forest vegetation prevails. The
biodiversity and the exceptional aesthetic ambiance create the favourable premises for the development of ecotourism
and the diversification of touristic activities in this area. The valuation of the bio geographical potential has in sight
the vulnerability of the vegetation at anthropic actions and emphasizes on the protection measures and conservation
of the environment. Our approach try to understand and analyze some of the components and natural ecosystems
within the area of the Moldova valley, on the territory of the Suceava County, by emphasizing their scientific,
biological, educational, and tourist importance. We can conclude that the development of future solutions in
managing the problem on a local scale must necessarily be correlated with the regional, national and European
policies and strategies The existence of the nine natural reservations in Moldova Basin on the territory of the Suceava
county can be considered, with no reserve, as an opportunity of sustainable development of tourism, through the
strategies of territorial development. The sustainable development of the analyzed region, represents a priority that
should be based on the local resources and strategies for territorial development.
Key words: sustainable development; natural capital; biodiversity; vegetation; ecological tourism; protected
plants
JEL classification: Z32
1. INTRODUCTION
The emergence and spreading of sustainable development concept has brought about a new
vision on natural ecosystems, due to the changes that have occurred within them and to the middle
and long-term consequences: the increase of vulnerability degree, the reduction of connectivity or
the isolation of various components of the natural capital. The continuous sprawl of the settlements,
especially of the urban ones, has led to a total or partial substitution of the natural and semi-natural
ecological network, as well as to its alteration through simplification, fragmentation and
connectivity restriction.
A more pragmatic definition of sustainable development shows that it equally requires the
following: “the capitalization of natural resources within the limits of the endurance capacity of the
ecological systems, the preservation of biological diversity within the confines of protected areas,
the ecological reconstruction of the ecosystems degraded by human impact, and protection
measures integrated in the sectoral development strategies interested in internalizing the
environmental costs and in assessing the impact of anthropogenic activities on the ecological
systems” (Petrișor, 2009).
Our approach seeks to understand and analyze some of the components and natural
ecosystems within the area of the Moldova valley, on the territory of the Suceava County, by
emphasizing their scientific, biological, educational, and tourist importance (Cocerhan, 2009).
Biological diversity is extremely important, especially due to its ecological, genetic, scientific
(Cocerhan, 2009), educational, recreation and aesthetic value. By the on-site conservation of the
ecosystems and natural habitats and by maintaining and restoring the viable populations in their
natural environment, we may ensure the preservation of biological diversity. So, the diversity of
biological systems is indirectly the support for the development of the ecological and semi-natural
systems.
The role of vegetal cover is vital for keeping the natural balance. This is a protection
buffer, which mitigates many of the negative impacts induced by human activities on the
environment.
The role and functions of the biological resources in triggering and supporting the tourist
phenomena cannot be fully assessed if they are analyzed in the general context given by the
ensemble of natural and anthropogenic factors. And this is true even more as the vegetation is a
decisive control in the creation of landscape (with an indisputable aesthetic function), while the
fauna positively influences certain areas.
2. PROBLEM FORMULATION
Location and limits. The part of the Moldova watershed lying on the territory of the Suceava
County overlaps three distinct terrain units: the Carpathians, the Sub-Carpathians, and the Moldova
Plateau (Martiniuc, 1956). The study area may be delimited from three standpoints, as follows: a
boundary of the watershed given by the water divide, an administrative boundary (of the various
administrative units that lie totally or partly in the Moldova watershed) and a tourist boundary
(Cocean, Vlăsceanu, and Negoescu, 2005), rather unclear, given by the main and secondary tourist
axes. From reasons pertaining to the complexity of tourist phenomenon and to the necessity of
quantitative analyses, it is easy to understand that, sometimes, the exact physico-geographical
boundaries and even the administrative ones are less important.
The water divide that separates on the southwest the Moldova and Bistriţa watersheds
following the Obcina Mestecăniş connects the maximum elevations belonging to an eastern, lower
ridge: Aluniș peak (1294 m), Lucina peak (1588 m), Chițcău peak (1430 m), Orata peak (1379 m)
and Mestecăniș pass (1096 m). The water divide continues then with the highest altitudes:
Giumalău peak (1857 m), Rarău peak (1651 m), Bâtca Oblânc peak (1474 m) and Poiana Brazilor.
To the north, northeast and east, the limit is given by the water divide separating the study area
from the Suceava and Șomuzul Mare watersheds, along the following summits: Veju Mare peak
(1494 m), Obcina peak (1270 m), Sihloaia peak, Hotarul peak (1137 m), Ciumârna Pass (1100 m),
Poiana Prislor (1180 m), Cacica peak (803 m). In the plateau area, the elevations are less than 500
m. The southern boundary of the county overlaps most of the watershed, with slight deviations,
following the maximum altitudes: Chițigaia peak (1194 m), Ceardac (911 m), and Dadeș peak (459
m), to the south, crossing then a tributary of the Târzia creek.
In the mountain realm, the Moldova watershed completely or partly overlaps the territories
of fifteen administrative units and about the same happens in the Sub-Carpathian and the plateau
areas.
In order to establish the key coordinates of the sustainable development pattern it is
necessary to assess the quality of the historical data and information regarding the operation of the
natural capital’s components (Mazilu, 2009), in order to answer the following questions: What is
the fragmentation degree of the habitats and what are the vulnerable components of the natural
capital? An immediate answer starting from the field realities is given by the most vulnerable
component, i.e. the vegetation, but problem statement requires correlations with previous studies.
At the same time, the development of future solutions in managing the problem on a local
scale must necessarily be correlated with the regional, national and European policies and strategies
(Mazilu, 2010). An opportunity in this respect is the Strategic Concept of Territorial Development
Romania 2030 (SCTDR), which relies on a vision of territorial development capable to bring forth
solutions derived from the needs and features of the various areas, which can contribute to a
balanced development of Romania and all the fields of activity. It is worth noting that special
emphasis is placed on the sustainable development of tourism (Mazilu, 2009), (Mazilu, 2008),
(Mazilu, Iancu, and Marinescu, 2008). Vădineanu (2004) (Vădineanu, 2004), estimated that the
optimal level of the economic activities corresponding to the productive and support capacity of the
local natural capital could be reached only around the year 2030.
2.1. Previous Research
The early investigations of the study area and the adjacent territories focused on the flora
and fauna. As early as 1859, Fr. Herbich published a work referring to the flora of the Bucovina,
which appeared in Leipzig (F. Volkmar Publishing House). But brief mentions on the Moldavia’s
flora and fauna were made very early by some foreign travelers, as well as by Dimitrie Cantemir in
his Descriptio Moldaviae, a work commissioned by the Berlin Academy.
As we approach the present, the number of studies grows. V. Panait (1969) investigates the
vegetation in the Moldovița watershed, focusing on the improvement of natural grasslands. The
grasslands were also studied by Popovici et al. (1996). Several studies were accomplished for the
territories lying in the neighborhood of our investigated area: Th. Chifu, N. Ștefan, D. Florea
(1973), M. Răvăruț, E. Turenschi D. Mititelu, (1961) (The Vegetation in the Suceava Watershed).
The topic was also approached by N. Barbu (1976), in a synthesis study focusing on the Obcinele
Bucovinei (Smaranda, 2008), as well as by V. Tufescu (1970), C. Brânduș & C. Grasu (1991), in
some works dealing with the Moldova Valley (Cocerhan, 2009).
The natural reserves were studied by T. Ștefureac (1967) and T. G. Seghedin (1983), while
the relic and endemic flora of the Bucovina was analyzed by T. Ștefureac (1967, 1970). The forest
vegetation was also approached both from the point of view of its relationship with the disasters
(M. Marcian – 2002) and from the standpoint of the ownership rights (C .G. Leon, 1999). The
spread of sustainable development concept and the tourism boom raised the problem of the better
management of the protected areas (Smaranda, 2008).
2.2. Zonal and Intrazonal Vegetation on the Suceava County’s Territory
The study area belongs to the Dacian Province, the Realm of the Eastern Carpathians. It is
characterized by a great diversity of Central-European vegetal formations with Dacian endemic
species. These are vertically arranged from the hilly area to the subalpine one. A specific feature of
the study area is the indisputable prevalence of the forest. It covers 133,097 ha, i.e. 68.56% of the
total area of the administrative units. Otherwise, almost the entire territory is included in the
historical Bucovina area, which explains both the name (buc = oak) and the many toponyms derived
from wooded areas. The forest is specific especially for the mountain realm, while to the Sub-
Carpathians and the plateau its percentage gradually drops. The western part is occupied by
conifers, the center by mixed forests, while to the east, in the area of the Obcinele Bucovinei, the
oak is prevalent. In the contact area, there are oak forests mixed with beech and hornbeam.
Vegetation closely matches the climatic altitudinal zones. The topography is not just a
support for the vegetation, but also an element that influences the spatial distribution of vegetal
cover. The influence of topography (especially the indirect one) is well known, inasmuch as the
altitude is responsible for the presence of the altitudinal zones, which are different depending on the
slope aspect. But the topography also influences directly the vegetation through the slope gradient.
2.2.1. Vegetation zones and subzones. The vegetation in the Moldova watershed lying on the
territory of the Suceava County vertically unfolds from the minimum elevation (286 m), which is
found where the river leaves the county, to the Giumalău peak (1857 m). The altitudinal zones and
subzones show the following floristic structure and composition:
The broadleaf forest zone. The Moldova Valley, from where emerges the mountains and as
far as Păltinoasa, is included by many geographers into the Moldavian Plateau. C. Martiniuc
considers this territory a geographical unit with distinct features, which he calls the “Piedmontane
plateau” (Martiniuc, 1956). The forest vegetation is made up of oak and beech, mixed with other
broadleaf species like cherry, hornbeam and maple. The beech-conifers subzone (Picea excelsa and
Abies Alba) develops in the piedmontane area of the Ciungi Massif and in the Mălini – Râșca Sub-
Carpathian area. It also includes other broadleaf species, such as Carpenus betulus, Tilia tomentosa,
Quercus petraea and Quercus robur. The beech subzone is prevalent in the eastern part of the
Obcine, on the slopes of the Obcina Mare (Barbu, 1976, pp. 200-201) (Barbu, 1976) and in the
Stânișoara Mountains, where “the mixed forests (beech-fir-spruce) cover almost entirely the
mountain range, descending as low as the eastern marginal depressions” (Roșu, 1980, p. 213).
Sometimes, the beech forms pure stands, but more often than not, it is mixed in different amounts
with fir or spruce.
The spruce-beech subzone is a transitional one and it shelters a wide range of floristic
elements. The basic components of these forests are spruce, beech and fir, the prevalence of which
depends on the local conditions. For instance, in the southern part of the Obcina Feredeu and partly
in the Obcina Mare the spruce prevails. Elsewhere, there are mixed forests composed of spruce, fir
and beech, spruce and fir, or spruce and beech, which make up forest stands with irregular
distribution. If usually, this altitudinal zone stretches from 750 to 1150 m, sometimes, due to the
cold air masses that linger on the bottom of the depressions (thermal inversions), it climbs as high
as 1400 m (the Tomnatic area in the Obcina Feredeu and the Plaiul Todirescu in the Rarău Mts.).
The spruce zone covers especially the western slope of the Obcina Feredeu, the eastern
slope of the Obcina Mestecăniș and the ridges of the Giumalău and Rarău massifs. Fir appears as
secondary element, while pine is a common feature of the watersheds of the right-hand tributaries
of the Moldova River as far as Pojorâta.
The subalpine zone of the Eastern Carpathians generally develops starting from 1650 m
altitude. In the Rarău massif, however, this altitudinal zone starts at 1550 m and climbs as high as
the maximum elevation in the area (Giumalău peak, 1857 m). The dominant species is mugo pine
(Pinus mugo) mixed with juniper (Juniperus communis), blueberry bushes (Vaccinium myrtillus),
lingonberry (Vaccinium vitis idea) and dwarf willow (Salix).
The herbaceous vegetation forms grasslands with diverse composition, which suffers the
pedoclimatic influence of the previously mentioned forest vegetation zones.
The grasslands in the beech zone. These grasslands are mainly composed of Agrostis tenuis,
Festuca rubra, Festuca pratensis, Dactylis glomerata, Lolium perennis and Poa pratensis, which also
spread on the low terraces of the Humor Valley and along the Moldova watercourse. The
prevalence of leguminous plants ensures a high nutritive value to the forage mass.
The grasslands in the beech-conifer zone. These are secondary vegetal associations, which
generally appear in the aftermath of deforestations. They can be spotted mainly in the Moldoviţa
Depression, along the Moldova Valley between Vama and Molid, as well as in the Obcina Mare, in
the form of glades. The most common species that make up these grasslands are Festuca rubra,
occupying the areas of the former beech woods, and Agrostis tenuis, which has replaced the forests
consisting of beech and fir. Less widespread are Nardus stricta and Arrhenaterium elatius, which
thrive on the areas formerly covered by beech or mixed forests (Barbu, 1976, p. 212).
The grasslands in the spruce zone. This type of vegetal association is specific for the
Moldova-Sadova depressionary corridor, more exactly for the alignment Izvoarele Moldovei-
Moldova-Sulița-Benia-Breaza-Măgura-Sadova-Câmpulung Moldovenesc. At the same time, it is
also found in the Lucina and Botuș depressions, as well as in the Răchitiș-Muncel-Pojorâta
depressionary corridor (Barbu, 1976, p. 211). The grasslands are made up of Festuca pratensis,
Festuca rubra, Nardus stricta and frequently of blueberry bushes (Vaccinium myrttillus), juniper
(Juniperus communis) and birch tree (Betula verrucosa). The grassland quality depends on the soils,
which are favorable for certain vegetal species. For instance, the skeletal rendzina soils offer good
conditions for the development of Poa nemoralis and Carex Montana, vegetal associations with low
nutritive value (Barbu, 1976, p. 212).
2.2.2. Intrazonal vegetation. Intrazonal vegetation does not comply with the latitudinal and
altitudinal zonation, but it is found in areas with different local conditions, having an insular or
linear appearance. In this category, we may include the floodplain vegetation (making up linear
formations along the rivers), the swamp associations, the saxicolous associations, found in the
rocky perimeters, and the halophytic vegetation developing on the salt-affected soils, which appears
on confined areas.
The floodplain vegetation. The woody vegetation consists of floodplain forests. Upstream
Molid village, the Grey Alder (Alnus incana) prevails, while downstream of it, the dominant species
are the willows (Salix alba, Salix purpurea and Salix viminalis) in association with white poplar
(Populus alba), and, less frequent, with black poplar (Populus nigra). In some areas lying along the
Moldova and Moldovița valleys, Myricaria germanica is common. The herbaceous vegetation
makes up grasslands, the productivity of which is influenced by soil fertility and drainage. On the
higher floodplain areas, where soils have good drainage, one can see grasslands with Festuca
pratensis and Lolum perennis.
The swamp vegetation. Generally, the swampy areas are small, because the lithological
formations are pervious. Most of them are found in the mountain area.
2.3. The Role of Vegetation and its Importance for the Natural Ecosystems
On the whole, the vegetation role is manifold: food source, fuel and especially raw material.
However, its most important role is that of turning the atmospheric carbon dioxide into organic
matter. By this process, the solar energy is converted and stored, while the air is purified and
enriched in oxygen. Air purification is done by carbon dioxide consumption, while oxygen
enrichment is the natural result of the photosynthesis process, which takes place after the formula:
6CO2 + 6H2O + solar energy = C6H12O6 + O2.
By this process, the solar energy is stored in an organic substance resulting from the
chemical reaction between the water absorbed from the soil and the carbon dioxide taken from the
air, while the oxygen is returned to the atmosphere. The process has a twofold importance for the
animal life, to which it ensures food and oxygen. For the anthropogenic activities, the associations
with high vegetal mass create special availabilities, as follows: exceptional aesthetic environment,
clean air, raw materials and various possibilities for tourist activities, with strong emphasis on
ecotourism (Cocerhan and Spânu, 2009).
The association of ecotourism with the imperatives of sustainable development and nature
conservation must comply with the following criteria: preserving the biological and cultural
diversity; supporting the sustainable development by ensuring jobs to local population; sharing the
benefits of the social-economic activities with the local communities, securing their support and
participation in the management process (Mazilu, 2010), (Cocerhan, 2012).
The forest distribution and composition is the result of a bunch of conditions generated by
the geospheres, but in their turn, these suffer the influences of the forest. The forest biosphere,
which is influenced and even controlled by the features of the other geospheres, has in its turn
manifold positive influences on the first ones (i.e. on air, water, soil, lithology etc.). At the same
time, it is a valuable resource and a favorable environment for its flora and fauna (Chiriță, 1981).
Forest influences are felt not only within its confines, “but also outside its perimeter, no matter if
the adjacent areas are natural or humanized” (Chiriță, 1981).
2.4. Hesychasm – Local Specific Form of Forest Sustainable Conservation
“Hesychia” means silence, inner stillness. Hesychasm means to reach the inner peace by an
incessant prayer in which one mentions repeatedly the name of the Savior. However, in order to
reach the peace of mind the hermits looked for the physical silence, retiring themselves in the
middle of nature, away from the turmoil of the secular world.
The Romanian monks were fond of the quiet woods and the simple life lived in the
mountain wilderness, as was recorded by the Romanian religious literature. For instance, St. Daniil
Sihastrul, who is considered “a great teacher of the wilderness and a counselor of the monks”, after
moving from hermitage to hermitage, finally retreated in 1470, when the Putna Monastery was
consecrated, to the Voreneţ area, „where he carved a cell into the stone, beneath the Hawk Rock.
Here, he lived a humble life for another twenty years in the love of God (...) (Chiriță, 1981). About
the devout Iov the Hermit is said: Iov the Hermit repented at the Bogdănești Monastery – Suceava,
where he lived humbly for a few years at the end of the 14th century. Then, wishing to pray the
Lord incessantly, he retreated in the secular forests beneath Mount Pleșu (…) (Chiriță, 1981).
Gathering around him more than fifteen monks, he established in the woods a small seclusion place,
which was long known as the Iov’s hermitage, before changing the name into the “Iova Glade”.
This was the hermitage of the monks belonging to the Bogdănești-Râșca Monastery. For centuries
on end, until today, watchful hermits have forced themselves here to a humble life (Chiriță, 1981).
Another argument for the hesychasm emerges from the Arhim’s writings. Ioanichie Balan: “…
Around the Moldovița Monastery (before 1402), as everywhere else, hermits fallen into oblivion
had been living a humble life since the 13th and 14th centuries. Some would remain unknown until
their death; others were living for a while as hermits in the forest glades and then returned to the
monastery”. For instance, the devout Isaia the Hermit from Moldoviţa (Chiriță, 1981), after he lived
a humble life in different monasteries, “craving the life of the old-time hermits, retreated in peace in
the forests around the monastery. There, he made himself a hut and continued to lead a humble
existence in prayer and self-remembering” (Chiriță, 1981).
The entire life of the Romanian people was strongly connected with the forest: the lodge, the
mill, the church, the furniture and the tools, all were made of wood, before other materials take
prevalence. So, we may speak above all of “a Romanian civilization of wood, with specific forms,
for about fifteen hundred years (…)”(Chiriță, 1981). The wood was the material used for the
building of the first churches and hermitages on the Moldova valley. In the Suceava land, the wood
architecture is a remarkable chapter of technical civilization and artistic expression; by its
distinctive features, it is part of the national and European cultural patrimony” (Chiriță, 1981).
Nearly every time when a stone building was erected, the remnants of older wood edifices were
unearthed. Otherwise, the architecture of the wood churches was at the origin of the Moldavian
architectural style.
The woods played a special role in the life of the Romanian people in general and in the
monastic life in particular. The forests where the hermits used to retreat in order to be away from
the world and close to God provided them shelter, food and tranquility. In the study area, there are
humble places of worship made of wood. Although they have a modest appearance, they have a
great historical and artistic value (Table 1).
3. PROTECTED NATURAL AREAS
The ascending progress of human society in a rhythm more and more alert, made pressure
on the environment particularly incisive. The growth of the number of population and the necessity
of larger surface of habitation, quantity of food and some different materials picked up in nature,
and the establishment of another lifestyle have led a more and more alert degradation of the
environment. The attitude of those responsible on our country’s territory has been in consensus with
the approach on global level. Among the first ways of protecting some areas in the Middle Ages has
been the declaration of owners of some areas as “fenced-in district”: “<The law> of the fenced-in
district, mentioned in the era of Matei Basarab, proves that this institution was ancient and was part
of <the tradition of the land>” writes C. C. Giurescu, (Cocerhan, 2010) and further defines “fenced-
in district” as:
“Fenced-in districts were forbidden or reserved places, in which no one was allowed to
enter to cut wood, reap hay, to feed cattle, hunt, and fish or to pick the fruits of the forest, without
the prior consent of the owner. Those who contravened, who broke the “law” of the fenced-in
district, were punished and the sentence varied, from the seizure of their cart and oxen, the axe,
hunting and fishing tools and clothes to cutting of a hand or even hanging.” (Cocerhan, 2010),
(Cocerhan and Năstase, 2011).
As in the Western Europe, initially, these restrictions were meant to limit the access of the
masses to the natural products offered by the forest, especially by hunting. This was a first step
taken closer to realizing the idea that resources are limited and some may even disappear
irreversibly. In Bucovina, the first official regulation regarding the regime of the forests was given
in 1786 and in Moldova in 1792. The regulation considering the exploitation of the forests in
Bucovina was published in the time of the emperor Iosif II, with the title “Forest polity” (Cocerhan,
2010). Even though in this counter time, Romania had been trying to keep up with the European
legislation, in 1872 hunting is legislated, in 1896, fishing, and in 1881 the first Forest Code of
Romania is released. This first code has a special importance regarding the regulations concerning
the exploitations of wooden mass. It has been applied until 1910. Even the republished code in 1910
takes many of the old one’s stipulations. Among the progressive stipulations of this act was also the
direct and active involvement of the state in the managerial activity of the forestry areas. Support
was given for those who respected the principles of exploitation of the forestry fund or for those
who reforested fields (awards, cash for reforesting, reduction of taxes). The less praiseworthy part
was the discriminatory regime regarding the forests from the mountain zones and the lower ones. Its
effect was a great liberty for the large landowners in the hill and plain to cut down broad surfaces of
broadleaf forests, especially oak and beech, with disastrous ecological consequences. It was a brutal
intervention in that epoch in the forested area. The idea of conservation extends to forests and other
elements, especially after, in 1819, Alexander von Humbold introduces the phrase “monument of
nature”. Being conscientious of the touristic importance of the Bucegi and, in the same time, of the
necessity of protection of the ecological integrity. Spiru Haret, in 1900, proposes the foundation of
a national park. In Bucovina, the clerical Fund, proposes in 1907, at the request of Austrian
authorities, as a protected area, the forest Slătioara. The completion of this demarche it is not made
until 1925 by the Romanian government (Cocerhan, 2010). In 1931, The Commission of the
Monuments of Nature appears. The first monuments of nature decreed by it were edelweiss (at the
proposal of Alexandru Borza) and Nymphea thermalis. On the segment of environment
preservation, in time, numerous governmental or non-governmental organism and organizations are
born. In the end, the International Congress of preservation of the nature, after elaborating a
resolution, has decided the establishment of the International Union for Conserving Nature, fact
which took place a year later (1948), at Fontainbleau (Spânu, Fuțăr, and Cocerhan, 2012). This
international institution has founded a system of classification of the protected areas, depending on
the purpose pursued, gathering up to ten categories (1978), system improved in 1994, limiting itself
to only six categories of protected areas. The system is applied nowadays too.
3.1. Natural Reservations
In the study domain there are protected area which can be included in three out of the six
categories: Category Ib (The wild area) (Peștera liliecilor), Category III (Natural monument)
(Klippa with triasic limestones, Pârâul Cailor – geological, Moara Dracului, Piatra Buhii) and
Category IV (Area of habitats/species management), (Secular Forest Slătioara, Secular Forest
Giumalău, Secular Forest Loben, Cheile Lucavei, Fânațele montane Todirescu, Pădurea Roșoșa,
Piatra Pinului and Piatra Șoimului, Pietrele Doamnei, the apthycus layers of Pojorâta, Tînovul
Găina-Lucina, Răchitișul Mare). Out of the protected areas mention above, those referring to the
vegetation are divided into only two categories, III and IV (Annex 1; Table 1).
Table 1. Natural reservations of the vegetation in Moldova area of Suceava county.
NO Reservation
Name Cat Reservation Type Custodian
Administration
localization
Area
(m2)
Nature 2000 site
overlapping the
reservation
1
Secular
Forest
Slătioara
IV
Forest Reserve (Secular
spruce fir and species of
communitarian interest)
Direcţia
Silvică
Suceava
Stulpicani 1064,2 Rarău- Giumalău
2 Secular IV Forest Reserve (Secular Direcţia Pojorâta 309,5 Rarău- Giumalău
Source: A.P.M. Suceava
I. Slătioara Secular forest
In 1907, the Ministry of Agriculture of Vienna requests from the Administration of the
Cleric Fond in Bucovina area proposals for future natural reservations. Two locations are
suggested: the secular forest of Rarău and Putna forest. This has taken a slow start: it was only in
1913 that a habitat of 408 hectares but the declaration of the reservation was issued by the
Romanian Government by ministerial decision re-actualized in 1941 with H.C.M 284 and included
in Law no. 5 of year 2000, number 2723. The surface suffered fluctuations over time: 671,11
hectares upon instatement, 295,28 hectares in 1931 at Slătioara, it was added another 292,92
hectares on Mountain Giumalău and 65 hectares from the Todirescu hay fields as a buffer area. In
1974 it had 609 hectares and in present it holds 1064,20 hectares assigned under the administrative
domain of Slătioara village.
If the initiative, at the beggining of the 20th century was issued from the Religionary Fund
of Bucovina, after the first World War the struggle for including other areas in the protected
category was lead by proffesor Mihail Gușuleac (1887-1960) from the Science Faculty of Cernăuți
(also a member of the Romanian Academy). Secular forest Slătioara is placed on the east slope of
Rărau, in the Slătioara brook basin (Spânu, Fuțăr, and Cocerhan, 2012).
This brook is formed by the confluence of four other small brooks: Văiuga with Valea lui
Ion and Valea Ursului with Valea Ceargăului. Slătioara is a tributary on the left side of Suha brook.
The above mentioned valleys separate almost parallel interfluves with rising altitudes towards
Mount. Todirescu and Popii Rarăului. The area altitude is ranged between 790 m and 1353 m
(according to the map from APM Suceava – 1487 m). The peaks on which this forest is settled are
Bâtca Neagră, Bâtca cu Plai and Bâtca Lesei. In this area we can find altitudes of 1000 m to over
1400 m.
The geological sub-layer is consists of the external flank of the syncline Rarău, with a
wildflysch built-up at the surface. The term wildflysch is given because of a chaotic built-up of
flinch elements together with different genetic and temporal elements: volcanic rocks, limestone
klippe. The forest, sometimes with multisecular trees, is composed of mainly resinouses: spruce fir
(Picea excelsa), fir (Abies alba), forest fir (Pinus sylvestris) and also isolated specimens of larch
tree (Larix decidua). We can also mention decidous species such as the beech (Carpenus betulus)
Forest
Giumalău
spruce fir) Silvică
Suceava
3 Roşoşa Forest IV Forest Reserve (Secular
spruce fir)
Direcţia
Silvică
Suceava
Moldoviţa 205,0 -
4 Secular
Forest Loben
Forest Reserve (Secular
spruce fir)
Direcţia
Silvică
Suceava
Moldoviţa 483,0 -
5
Todirescu
mountain hay
fields
IV
Botanical-hay field
reservation
(Flora species of
communitarian interest)
Direcţia
Silvică
Suceava
Stulpicani 38,1 Rarău- Giumalău
6
Tinovul
Găina –
Lucina
IV Botanical reservation
(Dwarf birch tree)
Direcţia
Silvică
Suceava
Moldova Suliţa 1,0 Găina-Lucina
7 Răchitişul
Mare IV
Botanical reservation
(Strugurele ursului)
Direcţia
Silvică
Suceava
Breaza 116,4 -
8
Pietrele
Doamnei-
Rarău
III
Mixt reservation
(Includes geological
formations and and
endemic flora species)
Direcţia
Silvică
Suceava
Pojorâta, Crucea 933,0 Rarău- Giumalău
9 Cheile
Lucavei III
Mixt reservation
(Of geological-
geomorphological interest
and vegetation with
protected elements)
Direcţia
Silvică
Suceava
Moldova Suliţa 33,0 Găina-Lucina
and, along the brooks, willows and alders (Spânu, Fuțăr, and Cocerhan, 2012), (Seghedin, 1983, p.
47).
II. Giumalău Secular Forest
The reservation was legalized in 1941, through Ministerial Council Decision NO. 284 and
reinstated according to Law NO. 5 from 2000, at NO. 2724. It stretches on the west slope of
Giumalău Mountain, between 1230 and 1680 meters, with a total surface area of 309.5 hectares.
The forest was declared a reservation thanks to professor’s Mihai Gușuleac diligence. It consists of
pure rammel of spruce fir (Picea abies) and has an important role in research, one being able to
monitor and evaluate the evolution dynamics of the spruce fir forest in the absence of anthropic
activities.
III. Roșoșa Forest and Secular Forest Loben
There are two forest reservations of relatively recent date that were declared protected areas
in 2007 according to the G.D. NO. 2007, with the approval of the Commission for the Protection of
the Nature Monuments of County Council Suceava, NO. 1111 and 1112 from 02.05.2006. The
Roșoșa Forest is situated in the Roșoșa Mountain area, in the superior basin of Moldovița, towards
the watershed with the Suceava basin, with a total surface of 205 hectares. Secular Forest Loben,
with a span of 483 hectares, is also located in the Moldovița basin on a small affluent on the left
side (Loben brook), from upstream of village Rașca. Both reservations are made of old forests and
are key witnesses for the unaltered evolution of the spruce firs (Spânu, Fuțăr, and Cocerhan, 2012).
IV. The mountain hay fields from Plaiul Todirescu
The reservation’s administration is from Stulpicani village, Slătioara. It can be reached
either following the road from the eastern side of Câmpulung Moldovenesc city or from the centre
of Frasin city on the road to Ostra, through Stulpicani, Gemenea and Slătioara. Plaiul Todirescu
with the mountain hay fields occupy the west slope of Mount Rarău, between 1200m and 1492m at
the upper side Secular Forest Slătioara, on the interfluve Moldova – Bistrița.
In 1931 it was proposed as a buffer area for the Secular Forest Slătioara, with a 65 hectares
area. Today the reservation’s area is 44 hectares. Because of the altitude influenced climate, the
fenologic cycle is shorter (May – September) and the blooming is delayed, most plants bloom in
July. It is the month in which the reservation displays its multicolored plant landscape. The border
between the forrest and the meadow with a micro transition area in which there can be found,
isolated, spruce firs (Picea abies), beech (Fagus silvatica) and field ash (Sorbus aucuparia). The
meadow is made of a diversity of plants, many of which endemic or protected, thus justifying the
reservation status of this area: leopard’s bane (Arnica montana), vinețeaua (Centaurea austriaca),
various bellflowers (Campanula abietina, Campanula spatula, Campanula persicifolia), monk’s
hood (Aconitum anthora), clocotișul (Rhinanthus glabra), globe-flower (Trollius europaea),
numerous daisies (Chrysanthemum leucanthemum) and many others (Spânu, Fuțăr, and Cocerhan,
2012), (Seghedin, 1983, p. 47).
V. Găina-Lucina Tinov
With a small area, of only 1 hectare, the tinov is found on a small affluent of Lucina brook
called Bilcani. It’s not very far from Lucina Stud Farm. It was declared a reservation in 1932. Being
a tinov, it’s basin is covered with a peat soil (with Sphagnum), suitable for the dwarf birch tree
(Betula nana), mixed with cranberries.
VI. Răchitisul Mare
The reservation protects an element of circumpolar Nordic flora – bearberry (Arctostaphylos
uva-ursi) mentioned since 1859 by the Austrian scientist Franz Herbich, on the sinuous roads and
gabbro fields from “the Moldova valley at Groapa and Breaza” (Spânu, Fuțăr, and Cocerhan, 2012).
The site is found on the west slope of Obcinile Mestecăniș, on Dl. Răchitișul Mare, between Tătarca
Mare brook and Tătărcuța brook, affluents on the right side of Moldova between Breaza de Sus and
Benia. The altitudes exceed 1000 meters. It was declared a natural reservation in 1955 (MCD
1625/1955) and is mentioned in Law no. 5/2000 at number 2725. The reservation shelters, besides
the glaciar relict of great floristic importance, the bearberry (Arctostaphylos uva-ursi) and forest
vegetation (forest pine, spruce fir, birch tree), dwarf shrubs (cranberry - Vaccinum vitis-idaea,
blueberry bush – Vaccinum myrtillus) and a rich grassy vegetation (mouse ear - Hieracium
transsylvanicum, bellflower - Campanula persicifoli, mountain carnation - Dianthus
carthusianorum, “curechiul de munte” - Liguaria sibirica) etc.
VII. Lady’s Rocks Reservation
The name has historical signification, reminding of Mrs. Elena, the wife of Petru Rareș,
which, according to the legend took shelter here in 1538. The area, with its massive limestone cliffs
(klippe), presents interest because it shelters rare vegetation such as the Argințica glaciar relict
(Dryas octopetala) and numerous endemic elements: the bellflower (Campanula Carpatica),
Nottingham catchfly (Silena nutans), columbine (Aquilegea nigricans) etc. (Spânu, Fuțăr, and
Cocerhan, 2012).
On the limestone sub-layer, in hidden places, grows the delicate lion’s foot, protected but
endangered because tourists still harvest it. The access to the reservation (with an area of 933
hectares) can be achieved from three sides: from Chiril on Bistrița valley or from Moldova valley
from the east side of Câmpulung city, on Pârâul Alb and from Pojorâta, on Izvorul Giumalăului
brook.
VIII. The Gorge of Lucava Reservation
The road leading to the Lucina stud farm, not far from the exit of Moldova Sulița, passes
through Cheile Lucavei, a result of Lucava brook, which penetrated the triasic pearl spar barrier on
the side of the sinclinal Rarău. The reservation (33 hectares) presents geomorphological interest but
also shelters protected plant species: bearberry (Arctostaphylos uva - ursi) and lion’s foot
(Leontopodium alpinum) (Spânu, Fuțăr, and Cocerhan, 2012).
3.2. Protected Plants
The demographic growth, in the course of history, has generated an expansion of the
anthropic domain and an invasion of the natural ecosystems. At a world scale, the phenomenon was
noticed early even though at first the economy aspect was of greater importance (Example: the
royal hunting grounds). With the passing of time other characteristics for an area to become
protected were taken into account: the research, instructive and touristic potential.
There are many plants which possess unique qualities (aesthetic, medicinal etc.) which were
harvested without regard to the regeneration capacity according to the species population. To this
was added the demographic growth which caused a chain reaction: the necessity of food – the
necessity of space – the invasion and destruction of the ecosystems. In the area studied we have
identified numerous protected plant species: lion’s foot (Leontopodium alpinum), leopard’s bane
(Arnica montana), globe-flower (Trollius europaeus), columbine (Aquilegia vulgaris), turk’s cap
lily (Lilium martagon), “curechiul de munte” (Ligularia sibirica), “foaie groasă” (Pinguicola
Montana), “gențiana” (Gențiana kochyana), lily of the valley (Convallaria majalis), snake’s head
(Fritillaria meleagris), lady’s slipper orchid (Cypripedium calceolus), sundew (Drosera
rotundifolia), mountain peony (Rhododendron kotschyi), yew (Taxus baccata), rose daphne
(Daphne cneorum).
3.2.1 “Albumița”, (lion’s foot) (Leontopodium alpinum), also has other name depending on
the region. The scientific name comes from the inflorescence’s shape resembling that of a lion’s
foot. It was the first plant declared a natural monument thanks to biologist Alexandru Borza
recommendation (1931). It’s the symbol of mountain hikes lovers. “For its delicateness and beauty,
it’s also been called the “queen’s flower”, as a queen among flowers” (Seghedin, 1983, p. 47). “The
plant’s reputation is due to the appearance, a wonder of nature. When you see it covered in silver
lint (“flocoșică” how the Romanians call it) among the other green plants, without thinking you
reach out for it.” (Simionescu, 1973, p.119). We must also add the advice from E. Pop sent to most
of the people who wrote about this monument of nature: “Insistent notice to those which, with all
the official warnings, will not overcome their temptation: to break or to cut only the top part, to
spare the organ from which the flower will be reborn; their sin will be lesser.” (Pop apud Băltărețu,
1980, p. 235). Still, nowadays there is the possibility to grow this flower and to eliminate the
extinction of the natural vegetation (Pop apud Băltărețu, 1980, p. 235). Lion’s foot is located in the
area of the Moldova Basin, on the limestone cliffs of Piatra Doamnei, in Cheile Lucavei and Cheile
Moara Dracului.
3.2.2. Leopard’s bane (Arnica montana) enriches the meadows in June – July with its
orange colored flowers. Together with other protected plants it can be found on Plaiul Todirescu. It
has a root the shape of a rhyzome and a reddish stem. A medicinal plant highly appraised for its
therapeutic properties: cicatrisation effect, vasoconstriction, decongestive, stimulates imunity and
has benefic effects for the respiratory pathway. Only the flowers are used for therapy. “Because in
Suceava county this plant was harvested for medicinal purposes in excessive amounts until 1971,
by protecting it we avoid its total destruction and assure its perpetuation. The plant is harvested
from hydrographic basins by rotation, once every 2 years, with the obligation of leaving at least 1
flower per square meter with the root intact.” (Seghedin, 1983, p. 47).
3.2.3. Globe-flower (Trollius europaeus), on the superior valley of Moldova, on Plaiul
Todirescu, glooms in August, has a yellow-green almost golden flower with green inter-veins on
the exterior side. It also has therapeutic qualities when used in very small quantities (2g/infusion),
in combination with other plants, for prostate cancer.
3.2.4. Columbine (Aquilegia vulgaris) can be found both in the wilderness and planted. It
prefers the sunny spots and the limestone sub-layer. It blooms in July in diverse colors: white, pink,
blue and lilac. Often appears along Moldova’s and Moldavița’s water course – planted, and in
bright hay fields.
3.2.5. Turk’s cap (Lilium martagon) is a protected species in almost all of Europe. It has an
inflorescence with 3 to 11 pink - red flowers, dotted with dark – purple spots. Can be found in the
Lucina hay fields.
3.2.6. “Curechiul de munte” (Ligularia sibirica), is a plant studied since the beginning of the
XIXst century and mentioned by Franz Herbich for the Țapul, Lucina, Cocoșul and Găina area
(Spânu, Fuțăr, and Cocerhan, 2012) (Seghedin, 1983). Can reach 150 cm in height, has short
ryzome with lateral roots. The flowers are golden yellow.
3.2.7. “Foaie groasă” (Pinguicola montana) has leaves displayed in a rosette shape, yellow-
greenish with viscosities. Measures 5-15 cm, the leaves also have a digestive function – it secretes a
sticky, digestive substance which dissolves the insects that are trapped in it. It is a carnivorous plant
as an adaptation to the environment. The flower blooms until July, with a blue – violet color. It can
be found in the Secular Forest Slătioara in the Lătoace rocky area (Simionescu, 1973, p.119). The
leaves also have therapeutic properties (caughing, asthm and more).
3.2.8. Gențiana (Gențiana kochyana). In the Câmpulung, Oușor and on the Todirescu
plateau region there is a flower called “ghințură”. It is a plant of a special gentleness, with flowers
of clear sky color, with a blooming period from May (Gențiana kochyana) to September (Gențiana
asclepiadea). Outside of the blueish tint it can rarely be found in yellow (Simionescu, 1973, p.119).
3.2.9. Lily of the valley (Convallaria majalis). From a horizontal rhyzome and the upwards
oriented extremity lanceolate leaves sprout with nerves ranging from 8 to 18 cm, which overgrow
the inflorescence type flowers: 5-20 white flowers, beautifully scented. It can be found in the
wilderness in the Câmpulung Moldovenesc area on Mountain Măgura but also planted in gardens
(Simionescu, 1973, p.119).
3.2.10 Fritillary (Fritillaria meleagris) also called “bibilică” in the Sasca-Baia area in
locations with high humidity. It has a flower stem of 20-30 cm and odorless, checkered, brown-
purple flowers.
3.2.11. Lady’s - slipper Orchid (Cypripedium calceolus) is an especially delicate type of
orchid. “When you see it for the first time, you stop in front of it as if it was a renowned painting
you always wanted to see up-close. Suddenly you can’t even tell: is it jewelry made out of
sapphires, rubies and diamonds when the dewdrop stops in its corolla? Is it a rare butterfly or a lost
humming bird?” (Simionescu, 1973, p.119). The orchid can be found in the Slătioara – Câmpulung
area, usually on calciferous, dark locations.
3.2.12. Round - leaved sundew (Drosera rotundifolia). It grows in oligotrophic peat bogs and
because of the extremely poor soil suffered a mutation transforming into a carnivorous plant to
compensate for the lack of nutritious elements. The small drops of sticky, nice scented substance,
which glitter in the sunlight, gave its name. The shiny beads at the top of the small pins are actually
a digestive liquid for the trapped insects. It can be found in the Găina – Lucina Tinov (Spânu, Fuțăr,
and Cocerhan, 2012).
3.2.13. Mountain Peony (Rhododendron kotschyi). Its name derives from the Greek words
“rhodon” = rose and “Dendron” = tree. It has red-purple flowers which bring color to the area in
July-August. Although called a peony it must not be mistaken for the Paeonia officinalis, the actual
peony. The plant has therapeutic qualities: the flowers, with a smell resembling cherries, can be
made into syrup or jam (Simionescu, 1973, p.119).
3.2.14. Yew (Taxus baccata). The yew, which at times formed clusters of forest, can only be
found in hard to reach sites and rarely in groups. The endangerment of the species came from two
fronts: the exploitation of the hard wood that it provides and the deliberate destruction. Animal
breeders caused the destruction because the leaves of the yew contain a certain poison, called
taxane (more specifically a glycozil). In the area studied yew specimens were found in the Moara
Dracului reserve, in Putna Valley, Pojorâta, Câmpulung Moldovenesc, Slătioara. A peculiar one
was located at Capul Câmpului with an age of over 350 years.
3.2.15. Rose Daphne (Daphne cneorum), in June – July, in the Secular Forest Slătioara there
can be seen a flower with an inflorescence in the shape of a flower head, reddish like an shrub of
about half a meter in height. The flowers resemble that of the lilac, with an almond smell. The fruits
are black and poisonous (Simionescu, 1973, p.119).
4. CONCLUSIONS
The sustainable development of the analyzed region, the Moldavian area, in the Suceava
district, represents a priority that should be based on the local resources and strategies for territorial
development. Tourism doesn't affect so much the natural environment as other economic activities
do. Conservation of the natural environment can be achieved as long as there is an equilibrium
between socio-economic system and surrounding environment (Scutariu, 2016, p. 138). Valuable
touristic resources exist in this space with opportunities for creating a durable tourism plan which
can assure the long-term development of the region, such as the Forest Reserves Secular Forest in
Slătioara, Secular Forest Giumalău, Pădurea Roșoșa, Secular Forest Loben, botanical reservations
Tinovul Găina – Lucina and Răchitișul Mare, or the mixt reservations Pietrele Doamnei - Rarău and
Cheile Lucavei. In their domain reside numerous species of endangered, protected plants of great
importance to the natural ecosystems.
Their disparition through uncontrolled exploatation would contribute to the impoverement
of the natural ecosystems and disrupting the natural balance, reason for which it is necessary to
promote the ecological tourism. In conclusion, the touristic capitalization of the vegetation can be
based on multiple types of tourism: ecotourism, sylvo tourism, sylvo therapy, landscape therapy and
chromotherapy, or, in association with the climatic elements, climatotherapy can be practised,
“green” therapy and different outdoors activities: hiking, trekking, harvesting medicinal plants,
berries, fruits etc.
Table 2. Wooden churches in the Moldova watershed on the territory of the Suceava County.
S.No THE NAME OF THE
ADMINISTRATIVE UNIT
SETTLEMENT DEDICATION OF THE
CHURCH
YEAR OF
FOUNDATION
1. BOGDĂNEȘTI Commune BOGDĂNEȘTI Sts. Voievozi wooden church 1805
2. BOROAIA
Commune
BOROAIA The Dormition of the Virgin
Mary wooden church
1808
3. CÂMPULUNG
MOLDOVENESC City
CÂMPULUNG
MOLDOVENESC
The Fire Squad wooden
church
2005
4. CORNU LUNCII
Commune
BĂIȘEȘTI (sept.1499) Sts. Voievozi wooden church 1778
5. DRĂGUȘENI
Commune
DRĂGUȘENI The Dormition of the Virgin
Mary wooden church and St.
Spiridon church
1780
6. FORĂȘTI Commune FORĂȘTI St. Nicholas wooden church 1764
7. FUNDU MOLDOVEI
Commune
COLACU St. Nicholas wooden church 1800
8. GURA HUMORULUI City VORONEȚ The Hermitage church ant.1472*
9. VAMA
Commune
VAMA Ascension of Jesus wooden
church
1783
10. MOLID St. Anne Hermitage –old style
(2000-under construction )
2000
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ANNEX 1. The basin of Moldova River within Suceava county map (vegetation and natural
reserves)
Associate Professor PhD Corina ENE
Faculty of Economic Sciences, Business Administration Department,
Petroleum-Gas University of Ploiești, Romania
Abstract:
In recent years, policymakers have paid increasing attention to the investor protection issue within the
financial markets, which can be considered the backbone of the legal architecture (including the supervisory side) that
supports capital markets.
By their nature, investments in the financial market involve a number of specific risks to which investors are
exposed, depending on the level of their financial education and the context provided by the authorities in the field.
The paper approaches the current stage and limits of the capital market investor protection within the
European Union. The actual focus on stability and the diversification of funding sources through the capital market
calls for an increase in the importance of investor protection, which should be seen as a core issue of the revised legal
framework.
Key words: capital market, investor protection, European Union, the Capital Markets Union, European
Securities and Markets Authority (ESMA).
JEL classification: E22, G19, O16
1. INTRODUCTION: INVESTORS IN THE CAPITAL MARKET - BEHAVIORS
AND RISKS
The principle of investor protection is one of the fundamental principles outlining the capital
market law (Duţescu, 2013). Compliance with this principle requires equality between investors,
market transparency, regulation and supervision.
Being a capital investment act, the acquisition of a security (share, bond, etc.) essentially
involves a capital transfer to an organization, expecting a return on the risk assumed by the investor
(Caraganciu et al., 2005 ).
An investor may be any person (natural or legal) who has entrusted money or financial
instruments to an intermediary (investment firm or credit institution) for the purpose of providing
investment services or an investment management company for the purpose of managing individual
investment portfolios (FCI, 2017).
On the capital market, there are two categories of investors (Olteanu, Vlad, 2007):
o professional investors (qualified as such, in Romania, according to Law no. 297/28th June 2004
on the capital market, with subsequent amendments and completions): they have experience and
specialized knowledge, being qualified for investment decisions and assessment of associated
risk.
This category includes various types of entities authorized to operate within the financial
markets (credit institutions, investment companies, collective investment entities and their
management companies, pension funds and their management companies, other institutions such as:
national governments, central banks, international and supranational institutions, etc.).
o individual (retail) investors: two subcategories can be distinguished as follows:
o large investors (also called institutional investors);
o small investors.
The importance of individual investors participation in the securities markets is derived from
the need to ensure market liquidity, in addition to the diversification component, which is a
condition of a healthy and strong market, given that a market dominated by professional investors
can become limited or even subject to risk.
The usefulness of individual investors on the capital market is also given by (Olteanu, Vlad,
2007):
o their tendency to maintain their position for longer periods of time, resulting in the protection of
issuers against excessive quotations;
o in the long run, they have the role of balancing the shareholder structure within a company.
Analyzing the specifics of the financial services consumer (investor), it can be appreciated
that in the context of an investment decision, a number of factors intervene in the formation and
manifestation of capital market behaviors:
o motivational factors: investor's personal expectations, personal confidence;
o behavioral factors: attitudes (derived from educational and environmental factors), the appetite
for risk, manifest behavior (the concrete way of action in a given situation);
o economic factors: available revenue, financial planning (expected revenues), potential losses;
o factors of the external environment.
A relevant feature of capital market investments lies in the uncertainty of the effects, in
terms of size and timing of their occurrence. Investors' reluctance is derived from two components:
o the difficulty of persuading investors to give up the convenience and momentary benefits of
their own savings, in the perspective of possible gains in the future;
o the difficulty in persuading investors to invest in capital market financial products to the
detriment of financial products offered by other players on the financial market: banks,
insurance companies, etc. Thus, the investor must be motivated to give up future safe gains,
having a fixed maturity, with minimal risk, in favor of investing in the capital market, which
could yield returns proportional to the assumed risk but also the risk of losing the initial
investment.
The investor's motivation is based on two components: the dividend gain and the gain
determined by the market value increase comparing to the purchase price.
The financial risk assumed by the investor is determined by the context of circumstances in
which an unwanted event has a certain probability of occurrence or when the size of the event has a
certain distribution possibility (Caraganciu et al., 2005).
The usual risks that an investor assumes - depending on his aversion to risk - include
(especially for private individual investors):
o the optional risk - given by choosing a security to the detriment of others, which may have
superior performance;
o the risk of the moment - derives from the possibility of registering losses by inappropriately
choosing the moment of sale or purchase;
o the market risk - associated with uncertainty about future levels of quotations as a result of
changing investor attitudes;
o the risk of vendibility - closely related to liquidity, depends on the ability to sell securities
without significant negative price variations.
As in the wider sphere of consumer protection, information and education - which can
become self-protection tools - play a decisive role in the behavior of investors on the capital market.
One of the ways of indirect protection of investors lies in ensuring their right to information
by issuers providing relevant information, according to the legal provisions.
In a study aimed at comparing financial market regulations for the protection of minority
shareholders in different countries (Jardak, Matoussi), it is underlined that in recent years,
regulators, academics and professionals have focused on corporate governance as a solution for
limiting inadequate management behaviors, including within the capital market. As a result,
different regulations and reports across the world have responded to the need to restore confidence,
to strengthen investor protection against opportunistic managers behaviors, to increase corporate
responsibility and to combat fraud.
An essential part of investor information on the capital market consists in the launching of
alerts / warnings by competent bodies, globally (e.g. IOSCO), regionally (e.g. ESMA in the EU)
and at domestic level (ASF, in Romania).
2. ADDRESSING INVESTOR PROTECTION GLOBALLY AND IN THE
EUROPEAN UNION
At international level, The International Organization of Securities Commissions (IOSCO)
carries out relevant activities in this area, being an international body that brings together global
regulators in the field of securities and setting out the global standards for this sector. IOSCO
develops, implements and promotes compliance with internationally recognized securities
standards, working closely with the G20 and the Financial Stability Board (FSB) on the global
agenda for reforming these regulations (IOSCO, 2017).
Regarding investor protection, there is a special section dedicated to this topic on the
IOSCO website, which includes (IOSCO, 2017):
o a portal containing alerts for investors;
IOSCO receives alerts and warnings provided voluntarily by IOSCO members regarding
firms that are not authorized to provide investment services in the jurisdiction that issued the alert
or warning. Some alerts or warnings refer to unauthorized companies that use similar names to
those of authorized or to unauthorized firms that falsely claim to be associated with authorized
firms, creating confusion for investors. The portal indicates the date when the alert or warning
appeared in the list and allows access to the text on the IOSCO member web page, but does not
provide a complete list of alerts and warnings launched by IOSCO members.
o a series of advices for investors;
Investors are advised to always verify - before investing - that the investment firm is
regulated and authorized by the competent national authorities and to acknowledge the rights they
are entitled to, complaints procedures and clearing schemes for the area where the firm is regulated.
Investors are also advised to be aware of alerts and warnings that are usually available on the
website of each regulator, especially if they suspect fraud or other illegal investment activities.
At present, as investments are no longer the exclusive attribute of privileged members of
society, consumers are increasingly exposed to various financial risks. In this context, a number of
rules have been adopted within the European Union (EU) to ensure that retail products are tailored
to the needs and interests of consumers. The basis for this protection consists of providing clear and
sufficient information, in accordance with the characteristics and needs of the target audience, by all
actors involved.
Thus, the EU aims to maintain high standards to ensure market integrity, financial stability
and investor protection, taking into account the wider global context.
Seeking a solution to create a true single capital market for all 28 EU Member States, in
September 2015 the Capital Markets Union (CMU) was launched as an action plan to stimulate
business finance and investment finance, based on the following key-principles (European
Commission, 2015):
o creating more opportunities for investors;
o ensuring the link between funding and the real economy;
o promoting a stronger and more resilient financial system;
o deepening financial integration and increasing competition.
A relevant role in this context lies with the European Consumer Organization (BEUC),
which analyzes European decisions that can affect consumers with special focus on priority areas
(including financial services).
The plan does not explicitly address the issue of investor protection, as BEUC has noted in
its initiatives. While the Commission seems to recognize that retail investor confidence remains an
important barrier to participation in the CMU, BEUC shows that initiatives to tackle this obstacle
have been completely absent from EU short-term priorities (BEUC, 2015).
At the same time, the European Commission's Green Paper on the creation of a Capital
Markets Union (2015) states that ensuring an effective level of consumer and investor protection is
one of the key principles that should underpin the union of capital markets.
Within the EU, the European Securities and Markets Authority (ESMA) is the institution
designed to improve the level of protection that benefit investors and to promote the stability and
smooth functioning of financial markets. Established in 2011, based in Paris, ESMA has as its
members the national authorities responsible for the securities markets of each Member State.
By its objectives, ESMA proposes (EU/ESMA, 2017):
o investor protection – to better respond to the needs of financial services consumers and
strengthen their investor rights whilst recognizing their responsibilities;
o good functioning of markets - to promote the integrity, transparency, efficiency and orderly
functioning of financial markets as well as sound market infrastructure;
o financial stability – to strengthen the financial system aiming to enable it to resist shocks and
the emergence of financial imbalances and to encourage economic growth.
ESMA is also responsible for coordinating the measures taken by the securities supervising
authorities or for adopting emergency crisis measures.
ESMA carries out four types of activities (EU/ESMA, 2017):
1. Evaluates investors, markets and financial stability risks. Through its databases and public
registers and by launching alerts, ESMA provides investors with information that promotes
transparency and protection.
2. Develops a single regulatory framework for the EU financial markets. ESMA develops
technical standards and advises European institutions on the development of new regulations,
thus contributing to the improvement of the EU single market.
3. Encourages the standardization of supervisory practices. ESMA promotes exchanges of best
practice and efficiency gains for both national authorities and the financial sector.
4. Directly supervises specific financial bodies - credit rating agencies and trade repositories.
Besides regulators of the securities markets and the financial services sector, private and
institutional investors and consumers are also among the beneficiaries of these activities.
Currently, the applicable legislative package - adopted following the financial crisis - is
made up of Directive 2014/65 / EU (“MiFID”), together with Regulation (EU) 600/2014 (referred
to as MiFIR), which together constitute the “MiFID II”.
This regulatory package is set to strengthen and replace the current MiFID framework and
covers securities markets, investment intermediaries and trading venues. MiFID II will enter into
force in all Member States as of 3 January 2018 and seeks to strengthen investor protection both by
introducing new requirements and by improving the existing ones.
In order to closely approach the aspects of the revised European financial market legislation,
some entities organize seminars, summer courses, conferences for professionals in the capital
markets. As an example, the Academy of European Law (ERA, 2017) organized in April 2017 a
conference on “Investor Protection in the EU”, focusing on:
o the impact of MiFID II / MiFIR on investor protection;
o the investors protection within the capital markets;
o insurance products and investor protection.
In 2014, in Wiesbaden, at the Investors International Conference on Shareholders' Rights in
Europe 2020, Steven Maijoor, the ESMA President, explained the catalyzing role of the CMU for
the development of the non-banking sector through diversifying sources of funding for the
economy.
On this occasion (Maijoor, 2014), Maijoor showed that:
o CMU aims to accelerate the integration of EU capital markets for the 28 Member States in order
to maximize the benefits of non-bank financial institutions' capital markets for the real
economy.
o The CMU objectives cannot be achieved if they focus exclusively on the needs of financial
institutions without establishing a high level of confidence for all types of investors in the
financial markets.
o Diversification of sources of financing the economy can only be achieved if investors -
especially retail investors - are encouraged to take part in this initiative.
o Better investor protection will increase their confidence and will gradually convince more and
more investors to consider the EU capital markets as an alternative to banking solutions as a
valuable option to diversify the portfolio.
o Properly informed and protected investors will take informed investment decisions based on the
range of products available on the capital market, suitable for their needs. With more confidence
in the markets and better understanding of the products they invest in, investors will be less
prone to irrational reaction to market events or to follow so-called “flock” behaviors.
According to Maijoor, investor protection is an essential dimension of each of the four
pillars of the CMU:
1. diversification of funding;
2. increasing the attractiveness of capital markets for both EU and abroad investors;
3. increasing the efficiency of the capital markets; and
4. strengthening and harmonizing financial supervision.
Maijoor acknowledges that the confidence of European investors in the financial sector is
currently low, which requires sustained, constant efforts to amplify it, as the restoration of investor
confidence is primarily the responsibility of the financial sector. Thus, in 2013, only 35% of retail
investors were confident that investment service providers complied with consumer protection rules
(Maijoor, 2014). This lack of confidence is particularly problematic in the European environment,
where there is a preference for savings through bank deposits, although these placements may
become inefficient because of bank fees and negative real interest.
In this context, regulation and oversight should strongly support this process of rebuilding
investor confidence in financial markets. MiFID II is considered to be a major step forward to better
protect investors, as the new rules address a wide range of important topics such as governance,
conflict of interest, client assets protection - which will significantly improve fair treatment of
investors. Moreover, MiFID II seeks to improve the level of protection offered to all types of
investors (Maijoor, 2014).
From the perspective of harmonizing and strengthening supervision, this revised framework
provides the conditions for implementing, applying, consistently supervising a set of core technical
rules to identify risks in the system at an early stage and to be able to act effectively in emergency
situations and in resolving disagreements between supervisors.
Similar ideas were reiterated in Stuttgart in 2016 at a capital market symposium (Maijoor,
2016), where the ESMA president stated that policy makers and regulators should address market
failures that have an impact on the level of investor protection. On this occasion, it was stated that
information and transparency - although important - are not sufficient to protect investors, and that
substantive requirements need to be applied to ensure full investor protection.
Regarding the investor protection, ESMA published in April 2017 a brochure containing
relevant questions and answers, outlining the practical aspects of MiFID II and MiFIR on this
subject (ESMA, 2017b).
In the context of its current role, ESMA has committed itself to create the framework for a
high and harmonized investor protection by ensuring adequate behavior of intermediary or advisory
firms in relation to financial instruments (ESMA 2017a). It is important for investors to make
informed decisions and have the certainty of being properly protected if something goes wrong.
ESMA therefore seeks to ensure that (ESMA 2017a):
o investment firms treat their clients in a fair and transparent way, putting their interests at the
heart of their business models and corporate culture;
o clear and relevant information is provided to investors; and
o investors are provided with products appropriate to their needs and their investment objectives.
The investor protection elements of the MiFIR introduce specific intervention powers for
ESMA and national supervising bodies which are able, under certain conditions, to temporarily
prohibit or restrict the presentation, distribution or sale of a financial instrument or a type of activity
or financial practice.
On its own website, ESMA has dedicated a special section for investors - “Investor Corner”,
which provides:
o a set of general advice for investors;
o an opportunity to verify whether the activity of an investment firm is authorized using a web
link to the competent national authority;
o the possibility to file a complaint in relation to an individual firm or a competent national
authority;
o alerts and publications for investors.
Launching warning alerts for investors is a useful tool to protect them, provided that they
deliberately access this information - which requires the prior existence of basic financial education.
For example, a useful asset is represented by the investor warning released in February 2014
under the title “Risks of investing in complex products” (ESMA, 2014).
In this brochure, ESMA suggests to investors to verify each time that an investment firm is
authorized to provide investment services because if the company is not authorized or regulated, it
is more likely that it will not comply with investor protection rules, and, as a result, investors lose
access to complaints or compensation schemes.
This ESMA warning was launched in the context of bank interest rates reaching a
historically low level, and investment firms have responded to the demand for return on investment
by offering complex investment products – different types of assets and strategies that were
previously only available for professional investors.
Complex products (futures, options and other derivative instruments) entail a number of
risks because:
o they are often aggressively marketed using attractive statements (examples: “absolute return”,
“guaranteed”, “covered growth”) or promise much higher returns than those available by banks.
These advertising promises may prove to be misleading or may have a different meaning than
originally understood.
o investors do not understand how complex products work, what are the associated risks, costs
and revenues;
o complex products may require a high level of knowledge to analyze and assess risks, including
active management and monitoring over time - making it difficult for retail investors.
The main messages addressed to investors (ESMA, 2104) suggest that:
o they should not invest if they do not understand the main characteristics of the product offered
or the main risks associated with it, but to seek professional advice on the right investment;
o they should take into account the fact that sometimes the name of a product may not properly
reflect its characteristics, avoiding the promise of “high”, “guaranteed”, “covered” or “absolute”
profits that often prove to be misleading;
o they should take into account the situation in which they need access to the invested money
before the date of liquidation of the product;
o they should understand the total costs, before investing, as these costs influence the resulting
yield and some similar but less complex products may be available at lower costs.
According to the ESMA warning, a financial product can be considered complex when:
o it is a derivative financial instrument or incorporates a derivative (the value of which is based on
the value of another financial instrument);
o it has indices or underlying assets that are not easy to evaluate or whose prices or values are not
publicly available;
o it has a fixed investment duration (example: penalties in the case of early withdrawal which are
not clearly explained).
The ESMA's 2014 warning also presents the main risks and disadvantages of investing in
complex products, which must be known and, where appropriate, assumed so that investment
decisions are made in an informed manner:
o the liquidity risk: refers to the impossibility of easily selling the product, if necessary, before the
expiration of its term. The lack of liquidity determines either the sale of the product with a
significant reduction from the purchase price or the impossibility of selling.
o the „leverage effect” risk: refers to those ways or strategies to multiply potential gains and
losses (examples: borrowing, using derivative financial instruments).
o the market risk: is the current risk of losses from market price developments. Market risk
increases as a result of investing in different markets of the support asset (examples: shares,
interest rates, exchange rates, commodities).
o the credit risk: derives from the risk of insolvency of the product issuer or of an associated
company so that the reimbursement of the investment becomes impossible. The rating provided
by credit rating agencies may suggest the issuer's likelihood of becoming insolvent, but cannot
guarantee that the investment will generate the expected return.
o the cost of complexity: it is associated with the degree of complexity of the financial product,
and there may be additional costs for the product's support features (or fees and commissions
already included without being explicit).
3. LIMITS OF THE CAPITAL MARKETS UNION REGARDING INVESTOR
PROTECTION IN THE EUROPEAN UNION
Research and recommendations included in a report drafted by the European Investors'
Working Group (EIWG, 2010) reveal that all capital market participants should assume a set of
principles of accountability and transparency in the context of the current priority of ensuring
financial stability. Thus, in order to restore investors' confidence after the financial crisis, it has
become necessary to review, supervise and adequately regulate capital markets by identifying,
measuring and controlling systemic risks. The study (EIWG, 2010) proposes the following:
o taking into account the limitations of European rules, investors also must carry out their duties
as responsible owners by actively supervising the governance and strategies of financial
institutions;
o investors need to focus more resources on diligent investigation and monitoring of their
investments, on seeking ways of cooperating with other investors to hold issuers accountable for
governance matters;
o European institutions need to invest more resources to streamline investor voting processes and
to promote financial education, providing greater protection for retail investors.
The EIWG Group believes that the EU agenda should focus primarily on restoring investor
confidence, listing six main objectives which should be pursued by the European institutions
(EIWG, 2010):
1. Investor protection;
2. Better transparency;
3. Market integrity;
4. Market efficiency;
5. Quality of surveillance and
6. Competitiveness of EU markets.
Achieving these objectives does not only entail the development of new regulations, but
should also include the elimination of current gaps and the harmonization of rules and the
supervision of the capital market in Europe.
In relation to the first objective - investor protection - the EIWG underlines the negative
impact of the financial crisis on the confidence of European investors (at both institutional and retail
level). This has led to a low participation of retail investors in the financial markets, with a negative
effect on the value of direct and collective investment. Since investor confidence is an essential
component in the efficient operation of capital markets, a way to restore it is precisely its
consolidation. Thus, the EIWG considers that investor protection should be seen as one of the
pillars of determining the evolution of the European agenda for the supervision and regulation of
the capital market.
Recent developments in financial markets have highlighted how the sale of financial
products to retail investors has been influenced by the imbalanced tax structure and compensation
mechanisms. In some cases, such clearing mechanisms compromise the ability of investment
consultants to prioritize customer interests, having - as professionals - a fiduciary duty towards their
clients. The sale of financial products should be based on an in-depth assessment of the investment
objectives, risk profile and financial constraints of customers.
For retail investors, it is often difficult to assess the adequacy of an investment product
before its acquisition and to critically evaluate its performance. Moreover, retail investors do not
have the experience or familiarity with the legal issues needed to identify incorrect practices (e.g.
hidden costs). In this context, the EIWG supports the idea of improving the financial culture at
Member State level to combat non-conforming practices.
Since, within the EU, shareholders do not benefit from homogeneous corporate governance
rules, a balanced approach is required so that shareholders have the appropriate means to express
their views and exercise their rights without affecting the efficient management of companies.
The EIWG believes that promoting a culture of best practice exchange would act as a
catalyst for better governance within the European Union.
The PriceWaterhouseCoopers report on CMU (PWC, 2015) reveals that this initiative
involves some risks, including market volatility that can increase systemic risks, reduce the ability
of small / local players to access funding, and weaken investor protection, in some cases, as a result
of the harmonization process.
In a study published in 2015, Ureta (Gasos et al., 2015, pp. 43-51) shows that detailed and
complex information on financial products can have only limited value in protecting retail
investors, while providing financial education to investors, and avoiding the use of confusing names
for financial products may be more efficient. The author points out that the need for financial
education is particularly evident in an environment of zero interest rates for secure assets.
Ureta (2015) also claims that investors should know that "Eldorado does not exist",
understanding that the return involves accepting risk (risk implications being difficult to understand
when investing in complex financial products). Thus, integrating financial education into business
models should be a priority for financial institutions and for the financial industry as a whole.
A series of signals from the Financial Conduct Authority (FCA) – the UK market regulator
(Jones, 2015) - draws attention to the fact that EU plans to stimulate funding through the market
risk harming consumers if there is not enough emphasis on investor protection.
Martin Wheatley, former CEO of the FCA, stated that CMU aims to facilitate companies'
access to equity and bond markets, rather than relying mainly on bank lending - as many companies
in Europe are still doing so today - without ensuring a fair balance between the need for economic
growth and the investors protection.
Wheatley argues that avoiding consumer protection is not viable in the long run, as CMU
will not succeed if profit becomes the main driver of behavior, as it was in the preceding period to
the financial crisis.
As a solution, while CMU is an EU initiative, internal regulating authorities should be able
to protect consumers by restricting the marketing or reducing the supply of new products for certain
consumers, along with improving information on financial products and services.
A recent study (Valiante, 2016) proposing a series of recommendations in the context of the
CMU shows that the lack of a pan-European agency for consumers, which could provide a unique
framework for the consumers protection , is a barrier to financial reform. The author suggests that
such an agency could support the coherent application of national consumer laws by limiting the
proliferation of local supervisory approaches and would provide more investor protection tools
through closer monitoring and easier access to the applicable tools in case of harmful practices. It is
proposed that this agency should operate under the ESMA supervision, whose mandate covers the
protection of investors and investment service users.
On the other hand, the European Commission (Green Paper, 2015) considers that European
supervising authorities can play a role in increasing convergence, given that national supervisory
systems can lead to different levels of investor protection which create barriers against cross-border
operations and may discourage businesses seeking funding in other Member States.
CONCLUSION
Capital markets operate efficiently when they attract capital and investors, allowing for an
efficient allocation of resources, aimed at boosting economic growth and prosperity. As a result,
market integrity and investor protection are of paramount importance.
At EU level, investor protection is considered at the same time a factor that facilitates the
diversification of financing sources for the economy, but also one that contributes to its stability,
based on the new revised legal framework, which requires consistent application of the same rules
and the use of similar approaches within the 28 Member States.
At present, although the need for strong investor protection – especially for the retail
investors sector - is clearly formulated at the theoretical and political level, its concrete application
does not yet benefit from the necessary framework, due to limitations such as insufficient financial
education, lack or gaps in national legislation , the existence of incorrect market practices,
insufficient or inadequate compensation mechanisms.
Building an integrated and efficient capital market is necessary, provided that due attention
is given to the imperative of investor protection.
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Associate Professor PhD Viorela IACOVOIU Petroleum-Gas University of Ploieşti, Romania
Professor PhD Adrian STANCU Petroleum-Gas University of Ploieşti, Romania
Abstract:
This study aims to highlight the correlation between innovation performance and economic development,
based on the main theories in the field. We analyzed specific indicators worldwide for the year 2013 namely Gross
Domestic Product per capita in current US$ (GDP/capita), as dependent variable, and innovation performance score
calculated by WEF (INOV), as independent variable. Different types of models were empirically tested with the IBM®
SPSS® Statistics Version 21 software. The results demonstrate that there is a significant correlation between variables,
which is best described by the cubic model.
Key words: innovation performance, economic development, correlation, regression equation
JEL classification: O11, C29, B23
1. INTRODUCTION
Most of the authors in the field, as well as the Organization for Economic Co-Operation and
Development (OECD), agree that today, the development of innovative capabilities is very important in
respect to competitiveness growth and addressing global challenges, as innovation, based on research
and development, is a “sine qua non of growth” (OECD, 2007; Năstase, Chașovschi, Popescu,
Scutariu, 2010; Iacovoiu, 2015).
Starting from this idea and given the theories and studies in the field, this paper aims to
highlight if there is a relationship between innovation performance, calculated by the World Economic
Forum (WEF), and economic development.
2. LITERATURE REVIEW
Since 2005, the Global Competitiveness Index (GCI) calculated by WEF, based on the key
drivers of economic development, is a comprehensive tool that emphasizes the critical factors for
productivity and competitiveness growth, as presented in the figure no.1.
According to this model (figure no.1), the factors are divided into three subindexes which
group the twelve pillars of economic development. Whereas the key drivers are different according
to the level of development, the model used by WEF attributes a superior weights to the pillars that
are “more significant for an economy given its own stage of development” (WEF, 2013), as shown
in the table no.1.
Thus, the twelfth pillar (“Innovation”) is mostly significant (30%) for the economies that are
in stage three of development, respectively the “innovation-drive” stage. In order to maintain and
increase their competitiveness, companies in these countries must use their innovative capabilities
to develop new products. As compared to these companies, firms in the economies that are in a
lower stage of development can still make use of technologies acquired through “scientific and
technological transfer”, to facilitate the increase of production efficiency and the quality of their
products (Iacovoiu, 2015).
Therefore, the increase of productivity can rely on innovation transfer only in the early
stages of development, because, as a country improves its technologies, maintaining and increasing
competitiveness requires to build and develop the own innovative capabilities (Akçomak and Bas,
2008; Becker, 2009). As such, only innovation can sustain the development of the economies “that
have reached the high-tech frontier” (Romer, 1987).
Figure no.1. Key drivers for economic development Source: WEF (2013), The Global Competitiveness Report 2013-2014: Full Data Edition, Geneva, p.9
Table no.1. Weight for the main drivers of economic development
Stages of
development
GDP per
capita
(US$)
Weight for
basic
requirements
subindex
Weight for
efficiency
enhancers
subindex
Weight for
innovation and
sophistication
factors
Stage 1
(Factor-driven) <2,000 60% 35% 5%
Transition from
stage 1 to stage 2 2,000–2,999 40–60% 35–50% 5–10%
Stage 2
(Efficiency-driven) 3,000–8,999 40% 50% 10%
Transition from
stage 2 to stage 3 9,000–17,000 20–40% 50% 10–30%
Stage 3
(Innovation-driven) >17,000 20% 50% 30%
Source: WEF (2013), The Global Competitiveness Report 2013-2014: Full Data Edition, Geneva, p.10
On the other hand, some economists criticized the endogenous growth theories as most of
the models empirically tested have failed „to explain conditional convergence” (Sachs and Warner,
1997) as well as the significant differences between the income in developed countries compared to
developing ones (Parente, 2001).
Moreover, Professor Paul Robin Krugman (2013), who is one of the most influential
economic thinkers in the USA, underlined the fact that too much of these models involve “making
assumptions about how unmeasurable things affected other unmeasurable things” (Krugman, 2013).
According to him, endogenous growth theory is very difficult to empirically verify.
Global Competitiveness Index
Basic requirements
subindex
1. Institutions
2. Infrastructure
3. Macroeconomic
environment
4. Health and primary
education
Efficiency enhancers
subindex
5. Higher education and
training
6. Goods market efficiency
7. Labor market efficiency
8. Financial market
development
9. Technological readiness
10. Market size
Innovation and
sophistication
factors subindex
11. Business
sophistication
12. Innovation
Key for
factor-driven
economies (stage 1)
Key for
efficiency-driven
economies (stage 2)
Key for
innovation-driven
economies (stage 3)
3. DATA AND METHODOLOGY
The relationship between innovation performance and economic development was analyzed
using Gross Domestic Product per capita in current US$ (GDP/capita) and innovation performance
calculated by WEF as the twelfth pillar of competitiveness (INOV). The indicators values for a
number of 141 countries in the year 2013 are presented in Appendix.
As presented in “The Global Competitiveness Report” published by WEF, the INOV value
is calculated based on the following parameters, focused on “technological innovation”: “Quality of
scientific research institutions”; “Company spending on R&D”; “Capacity for innovation”;
“Availability of scientists and engineers”; “Government procurement of advanced tech products”;
“PCT patents, applications/million population”; “University-industry collaboration in R&D” (WEF,
2013).
Based on the theories in the field, we tested the correlation between the GDP per capita and
INOV using the IBM® SPSS® Statistics software, starting from the following relation:
GDP/capita = f (INOV) (1)
The following steps were performed to highlight the regression equation which describes the
correlation between the GDP per capita and INOV:
Creating the scatter plots;
Graphing the fitting line for the Linear, Logarithmic, Inverse, Quadratic, Cubic, Power,
Compound, S-curve, Logistic, Growth, and Exponential models;
Calculating the F and R square indicators;
Determining the regression equation.
There were only considered models for which the value of significance probability (Sig.) is
under .05 (5%). The model with the higher coefficient of determination value (R Square) describes
in the best way the relationship between variables.
4. RESULTS AND DISCUSSIONS
The values of F and R Square and of the parameters of the regression equation for the
Linear, Logarithmic, Inverse, Quadratic, Cubic, Power, Compound, S-curve, Logistic, Growth, and
Exponential models are synthesized below (table no.2).
Table no 2. Values of F and R Square and of the regression equation parameters (Dependent
Variable: GDP/capita; Independent variable: INOV)
Equation Model Summary Parameter Estimates
R Square F df1 df2 Sig. Constant b1 b2 b3
Linear .612 206.842 1 131 .000 -54797.174 20824.970
Logarithmic .574 176.153 1 131 .000 -73881.614 74971.756
Inverse .508 135.397 1 131 .000 92170.172 -246757.885
Quadratic .623 107.373 2 130 .000 -13211.443 -1754.699 2889.062
Cubic .677 90.103 3 129 .000 319943.095 -280947.258 78013.130 -6470.218
Power .494 127.968 1 131 .000 28.102 4.575
Compound .497 129.432 1 131 .000 102.502 3.433
S-curve .467 114.794 1 131 .000 13.618 -15.551
Logistic .497 129.432 1 131 .000 .010 .291
Growth .497 129.432 1 131 .000 4.630 1.234
Exponential .497 129.432 1 131 .000 102.502 1.234
Source: Own calculation based on data in Appendix
Consistent with the presented analysis, the cubic model describes the best the correlation
between the two variables, as 67.7% of the variation in the GDP/capita is determined by INOV. As
underlined above (table no.2), the value of F square for all other analyzed models is lower than
67.7%, respectively from 49.4% (Power model) to 61.2% (Linear model).
The cubic regression equation is:
GDP/capita =319943.095-280947.258(INOV)+78013.13(INOV)2-6470.218 (INOV)3 (2)
Figure no.2 shows the fitting line which describes the spread of data points for the cubic
model.
Figure no 2. The Fitting Line of the Cubic Model
Source: Data in Table no.2
Therefore, the cubic model reveals a relatively strong correlation between innovation
performance (INOV), as independent variable, and economic development given by the
GDP/capita, as dependent one. This statement is in line with most of the theories in the field that
underline the importance of innovative capabilities for productivity and competitiveness growth,
especially in those countries that are in the superior stages of economic development.
5. CONCLUSION
The results of the analyses presented above demonstrate that there is a significant correlation
between innovation performance score calculated by WEF (INOV), as independent variable, and
the economic development, given by the level of GDP/capita. This correlation is best described by
the cubic model, as 67.7% of the variation in the GDP/capita was determined by the variation of
INOV.
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1. Akçomak, I.S., Bas terWeel (2008), Social capital, Innovation and Growth: Evidence
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line, [Accessed on July 16, 2015];
15. WEF (2013), The Global Competitiveness Report 2013-2014: Full Data Edition,
Geneva
APPENDIX
GDP/capita and INOV score (2013)
No. COUNTRY GDP/capita1
(current US$)
INOV
Score2
1 Luxembourg 110,664.80 4.7
2 Norway 100,898.40 4.9
3 Qatar 93,714.10 4.8
4 Switzerland 84,748.40 5.7
5 Australia 67,463.00 4.45
6 Sweden 60,380.90 5.43
7 Denmark 59,818.60 4.99
8 Singapore 55,182.50 5.19
9 United States of America 53,042.00 5.37
10 Kuwait 52,197.30 2.81
11 Canada 51,964.30 4.47
12 Netherlands 50,792.50 5.16
13 Austria 50,510.70 4.82
14 Ireland 50,478.40 4.58
15 Finland 49,150.60 5.79
16 Iceland 47,349.50 4.28
17 Belgium 46,929.60 4.87
18 Germany 46,251.40 5.5
19 United Arab Emirates 43,048.90 4.22
20 France 42,560.40 4.68
21 New Zealand 41,824.30 4.34
22 United Kingdom 41,781.10 4.9
23 Japan 38,633.70 5.49
24 Brunei Darussalam 38,563.30 3.38
25 Hong Kong (China) 38,123.50 4.44
26 Israel 36,050.70 5.58
27 Italy 35,685.60 3.69
28 Spain 29,882.10 3.75
29 Korea, Republic of 25,977.00 4.78
30 Saudi Arabia 25,961.80 3.93
31 Cyprus 25,249.00 3.41
32 Bahrain 24,689.10 3.17
33 Slovenia 23,295.30 3.63
34 Malta 22,775.00 3.61
35 Greece 21,965.90 3.08
36 Oman 21,929.00 3.57
37 Portugal 21,738.30 3.93
38 Czech Republic 19,858.30 3.7
39 Estonia 18,877.30 3.89
40 Trinidad and Tobago 18,372.90 2.92
41 Slovakia 18,049.20 3.02
42 Uruguay 16,350.70 3.11
43 Chile 15,732.30 3.6
44 Lithuania 15,529.70 3.58
45 Latvia 15,381.10 3.21
46 Barbados 14,917.10 3.51
47 Argentina 14,715.20 2.99
48 Russian Federation 14,611.70 3.13
49 Venezuela, Bolivarian Republic of 14,414.80 2.45
50 Poland 13,653.70 3.24
51 Kazakhstan 13,611.50 3.1
52 Croatia 13,597.90 3.12
53 Hungary 13,485.50 3.51
54 Gabon 11,571.10 2.51
55 Brazil 11,208.10 3.42
56 Panama 11,036.80 3.72
57 Turkey 10,971.70 3.47
58 Malaysia 10,538.10 4.39
59 Mexico 10,307.30 3.35
60 Costa Rica 10,184.60 3.74
61 Lebanon 9,928.00 2.73
62 Romania 9,490.80 3.01
63 Mauritius 9,477.80 3.11
64 Colombia 7,831.20 3.16
65 Azerbaijan 7,811.60 3.45
66 Belarus 7,575.50 -
67 Bulgaria 7,498.80 2.97
68 Botswana 7,315.00 2.99
69 Montenegro 7,106.90 3.42
70 South Africa 6,886.30 3.64
71 China 6,807.40 3.89
72 Peru 6,661.60 2.76
73 Serbia 6,353.80 2.85
74 Ecuador 6,002.90 3.4
75 Dominican Republic 5,879.00 2.83
76 Angola 5,783.40 2.15
77 Thailand 5,779.00 3.24
78 Namibia 5,693.10 3.02
79 Algeria 5,360.70 2.38
80 Jamaica 5,290.50 3.11
81 Jordan 5,213.40 3.44
82 Belize 4,893.90 -
83 TFYR of Macedonia 4,838.50 3.09
84 Iran, Islamic Republic of 4,763.30 3.21
85 Bosnia and Herzegovina 4,661.80 3.28
86 Albania 4,460.30 2.8
87 Fiji 4,375.40 -
88 Tunisia 4,316.70 3.06
89 Paraguay 4,264.70 2.45
90 Mongolia 4,056.40 2.89
91 Ukraine 3,900.50 3.03
92 El Salvador 3,826.10 3.01
93 Cabo Verde 3,767.10 2.83
94 Guyana 3,739.50 3.41
95 Georgia 3,596.90 2.68
96 Armenia 3,504.80 2.99
97 Guatemala 3,477.90 3.05
98 Indonesia 3,475.30 3.82
99 Egypt 3,314.50 2.79
100 Sri Lanka 3,279.90 3.49
101 Morocco 3,092.60 2.94
102 Swaziland 3,034.20 2.83
103 Nigeria 3,005.50 3
104 Bolivia, Plurinational State of 2,867.60 3.15
105 Philippines 2,765.10 3.21
106 Honduras 2,290.80 2.76
107 Moldova, Republic of 2,239.60 2.42
108 Viet Nam 1,910.50 3.14
109 Uzbekistan 1,878.00 -
110 Ghana 1,858.20 3.27
111 Nicaragua 1,851.10 3
112 Zambia 1,844.80 3.36
113 Sudan 1,753.40 -
114 Côte d'Ivoire 1,528.90 3
115 India 1,497.50 3.62
116 Yemen 1,473.10 2.12
117 Cameroon 1,328.60 3.11
118 Pakistan 1,275.30 3.13
119 Kyrgyzstan 1,263.40 2.2
120 Kenya 1,245.50 3.56
121 Lesotho 1,125.60 2.47
122 Senegal 1,046.60 3.18
123 Tajikistan 1,036.60 -
124 Cambodia 1,006.80 3.05
125 Bangladesh 957.8 2.54
126 Zimbabwe 953.4 2.68
127 Tanzania, United Republic of 912.7 3.06
128 Benin 804.7 2.84
129 Burkina Faso 760.9 2.86
130 Mali 715.1 3
131 Nepal 694.1 2.56
132 Uganda 657.4 3.04
133 Rwanda 638.7 3.44
134 Togo 636.4 -
135 Mozambique 605 2.63
136 Guinea 523.1 2.4
137 Ethiopia 505 2.76
138 Gambia 488.6 3.22
139 Madagascar 463 3.09
140 Niger 415.4 -
141 Malawi 226.5 2.9
Source: 1) The World Bank, Data, http://data.worldbank.org/indicator/NY.GDP.PCAP.CD, on-line, [Accessed on July
16, 2015]; 2) WEF (2013), The Global Competitiveness Report 2013-2014: Full Data Edition, p.22.
Prof. dr. Carmen NASTASE
University Stefan cel Mare, Suceava, Romania [email protected]
Prof. dr. Touria NEGGADY ALAMI
HASSAN II University, Casablanca, Morocco [email protected]
PhD Student Zakaria AIT TALEB
HASSAN II University, Casablanca, Morocco [email protected]
Abstract:
Motivation is the driver of the performance in the workplace, as it is the energy that leads and maintains the
effort of the worker. Since the early years of the 19th century researchers gave more importance to it. Therefore several
theories have been developed to explain what motivation is, what motivates, or demotivates people and what
environment is the most suitable to reinforce motivation. However, most of the main authors on this field recognized the
importance of the culture in the motivation process, sources and consequences, and yet, they did not demonstrate what
specific elements of the motivational process vary from a culture to another. This paper tries to explore the main
motivation theories and merge them into a model of motivational process. Then, based on that model, we set an
experiment to see what steps of the motivational process are being influenced by the culture. This experiment, consists
of a group of tasks to be performed by participants from Morocco and Ukraine and the observation of their behaviour
towards them. The importance of this work is about understanding if yes or no, the motivation can vary from a culture
to another, and what specific elements can actually vary. These answers would attract further questions for following
researches as what specificities of cultures can generate what precise influence on what element of the motivational
process.
Key words: motivation, culture, human resource management, intercultural management.
JEL classification: O15, Z10
1. INTRODUCTION
In the company the employee is in the center of all activities as the management job is to
making do the right thing the right way, the essence of which is motivation.
Successful motivation in the employee is ideally intrinsic to the human being but it is also
stimulated by the outside through rewards, congratulations, respect. Management therefore has an
undeniable role to play in motivating employees. However, in order to fully exploit and develop the
productivity, it is necessary to know how to motivate the worker according to his own
characteristics, which are mainly found in his culture.
We will then see the concept of motivation (its sources, its process and the importance of the
goal in its stimulation). Then, to verify the impact of culture on motivation and to analyze where
this impact occurs in the process of motivation at work.
2. MOTIVATIONAL PROCESS
Motivation is defined as "the hypothetical construct used to describe the internal and/or
external forces producing the trigger, direction, intensity and persistence of the behavior"
(Vallerand et Thill, 1993, p.18), besides it was analyzed by several authors who insisted on three
elements to understand it: Needs, Processes and Purpose. Thus, the person feels the need, seeks a
means to satisfy it, this means represents a wish that crystallizes into a goal to be attained
(Perception plays an important role at this level since the goal might not lead to Satisfaction of the
need but perceived as the opposite or the opposite). It is from this that this goal generates an energy
that leads to the triggering, direction, intensification and maintenance of the effort to achieve this
goal.
The three elements to be retained are thus the needs that are at the origin of the motivation,
the process of its launching and reinforcement and finally the purpose of which it is the object:
Needs: Motivation comes from felt needs, without which there is no reason to provide
effort.
- Maslow, Has classified human needs into levels: Physiological, security, Belonging,
Self-esteem, Self-realization.
- McClelland (1976)proposed a new categorization of human needs: Power,
Affiliation and Achievement.
Process :
Several authors have been interested in the process leading from the motivation of simple
unsatisfied need to action directed towards a specific objective. Among these authors we find:
Atkinson (1957),who presented the assessment of the probabilities of success and the
consequences of success and failure that are made upstream and which decide the level of
motivation generated as a basic element in the process of motivation.
Vroom (1964),Who presented the motivation as the result of a perception that more effort
would bring more results and the latter would automatically result in more reward.
Adams (1963)has developed the process of these estimates by specifying that they are done
by comparing the efforts of the individual with those provided by others, but also the results
obtained to those obtained by others. Thus, man establishes an Effort / Result ratio that he
compares to the same ratio in others to be more motivated/demotivated.
Albert BANDURA (1997),Who introduced the sense of self-efficacy as determinant to the
estimated probability of success and thus to motivation.
At this level, all the authors recognize the weight of the cognitive dimension in the process
and accept that it is never the probability of real success, nor the ratio Effort / real result, but
rather the perception of the individual and his / her understanding of what is fair, just,
valuing, important.
Thus, the probability of success or failure, the ratio Effort / result, the value of the reward
are all subject to the perception of the individual.
The goal: Locke & Latham (1990), emphasized that the importance given to time in the
instruction would draw attention to it but would cause a possible neglect of the quality or quantity.
In this theory, several elements are taken into consideration, including: delays, feedbacks,
quantification of objectives, etc.
These approaches have been applied and have resulted in a huge success in the united-states
where they were initiated. Companies in other countries were inspired by it and followed
management models that corresponded to them, such as management by objectives. An evolution of
task delegation and empowerment, encouragement of autonomy. However, the concept has not
evolved equally everywhere in the world. For example, in the United States of America and Great
Britain, where culture itself is individualistic, with a small hierarchical distance, and where
interactions are not very diffuse, the concept has easily been assimilated, whereas in more
collectivist countries such as Russia, Saudi Arabia and Morocco, management has less often used
these practices which are up to now declared motivating. It is at this level that one asks the
following question: Is it because managers are not ready to use certain practices that are unfamiliar
to them or because this approach does not give the desired effect in the Cultures? Formulated
differently, the question is: Are the mechanisms of motivation the same everywhere in the world
and regardless of culture?
To find an answer to this question we carried out an experiment which was carried out on
two culturally different countries namely: Ukraine and Morocco.
3. DESCRIPTION OF THE EXPERIMENT
The objective of this experiment is to verify empirically whether the motivation for work
influenced by culture, and if so, at what level.
Methodology - In order to verify this we have studied the behavior of individuals belonging
to three cultures with characteristics are quite distinct (as presented by Hofstede, Trompenaars and
Hall). Thus, we have put the proven elements influencing motivation and are nevertheless objects of
the differences between the cultures (Collectivism / individualism, universalism/particularism,
strong context/weak context ). We translated them into practical situations involved in tasks to be
performed. To see how these elements will influence the level of motivation of individuals. Thus,
ambiguity, complexity, time (delays), communication (instructions and feedback) and work in the
presence of a group were considered to be variable in an experiment consisting of a series of tasks
(reflective exercises) To be made to participants in the two countries of the study.
In practice - The experience consists of a series of tasks (exercises to be performed), some
of which are considered amusing, some annoying, instructions varying between clear,
communicated orally, ambiguous and non-existent, certain exercises are impossible, with long
delays, illogical. Moreover, some participants receive emotional feedback, others emotionally
neutral feedback and finally other participants receive no feedback.
Before they answer, the subjects inform the level of perceived difficulty of the exercise,
mark on their level of motivation and activate the stopwatches to stop it when they decide to give
up or they finish the exercise.
Topics can ask questions or submit proposals, answer, abandon, respect or not the deadlines.
Finally, at the end of the experiment, participants respond to a questionnaire that provides
information on their motives, emotions, motivation / demotivation in a qualitative and quantitative
way.
Conditions of the experiment :
- Characteristics of populations studied:
Countries Maroc Ukraine
Sensitivity to Uncertainty Average high
Orientation Internal / External Internal Average
Context top top
affectivity high Average
Masculinity Average Low
Monochronic / Polychronic polychronic monochronic
allotment high high
- Number of participants: 30 participants
o 15 Ukrainians
o 15 Moroccans
- Conditions of the experiment: The participants spent the experiment in a group, they had all
the explanations requested and the experimenter was present throughout the period of the
test.
- Location: Classrooms / Offices
- Duration: unlimited with the possibility of giving up at any time.
- Instructions: Individually solve logical, mathematical or psychotechnical problems
presented in the form of tasks with different specificities.
- Test Features:
Characteristics of the test:
Accessible to everyone
Composed of several exercises (20 to 30)
Leave the choice to do the exercise
Test where you learn things
Amusing
Emotionally neutral experimenter with the exception of the moment of feedbacks
2 to 4 subjects per test at the same time
- Content of the experiment:
Tasks:
How to assess motivation:
The motivation is recognizable according to Vallerand et Thill (1993) through 4 elements:
1- the triggering of the behavior: Choice of doing the task
2- Intensity: The quality of presentation of the paper, the care to give the answers, the level
of detail;
3- The perseverance of the effort: Chronometer of the duration taken for each task;
4- The orientation of the effort (the goal): respect of instructions, importance given to time,
quality of answers, quality of presentations .
Moreover, motivation is also an energy felt and recognized by the individual, since it is "a
process that involves the will to perform a task or to achieve a goal" levy-Leboyer (1984). We
tested the 4 elements to define the level of motivation. While asking the subjects themselves to rate
their level of motivation for each task to be done.
Thus by proposing different tasks with characteristics perceived differently from one culture
to another and then evaluating the motivation generated accordingly. We can know just how
Content of tasks:
Simple Exercises
Complicated exercises
Exercises impossible
Instructions that do not lead to the
goal
Variation applied to simple tasks:
Clear rules Ambiguous rules
Without deadline With deadline
Without feedback With feedback
Task Specificity Deadline in minutes
Oral Oral
1 Simple
2 Simple
3 Ambigu 4
4 Simple 2
5 Impossible 5
6 Simple 4
7 Ambigu
Task Specificity Deadline in minutes
8 Simple 2
9 Complicated
10 Simple
11 Impossible 7
12 Ambiguous
13 Complicated 8
15 Impossible 3
18 Impossible
ambiguous, written / oral, the affectivity of feedback. Could influence the perception of purpose,
feedback, equity and the rest of the elements raised in the previously cited theories of motivation.
Table no 1. Variables studied and theories they verify Evaluated Variables Main theories to be tested:
Ambiguity / clarity of instructions Clarity of objective presented by Locke
Perceived Facility / Difficulty of Tasks The curve of the inverse U (the motivation evolves with the evolution
of the difficulty).
Emotivity of Feedback Impact of culture's emotivity on the perception (and effectiveness) of
feedback.
No Feedback Impact of the reward (Deci & Ryan; Locke ...)
time Attention given to time (Hall) / impact of delay on motivation
(Locke)
Challenge of instructions Level of indulgence (Hosftede); Involvement with purpose
Length of experience (and tasks) Linking Indulgence and Motivation (McGregor)
Oral / written explanations Perception of the probability of success, the importance of the
ambiguity goal ... according to the level of importance of the context
in the culture (Hall, Vroom, Adams ...)
Importance of tasks Impact of perceived importance on motivation (Vroom, Deci &
Ryan, Atkinson)
Conviction of being able to successfully
exercise
Self-efficacy (Bandura, Deci & Ryan)
Level of fun Intrinsic motivation; Motivation to fun (Deci & Ryan; Blais & al.)
Level of intellectual stimulation Motivation to knowledge (Deci & Ryan; Fenouillet; McClelland)
Level of challenge Motivation for Achievement (Deci & Ryan, Fenouillet, McClelland,
Maslow, Locke, Vroom ...)
Mobile to experience Deep Need
Comparison with others Collectivism, particularism (Hall, Hofstede ...)
Estimated probability of success Self-efficacy (Bandura)
4. RESULT S OF THE EXPERIMENT AND QUALITATIVE RESULTS
Through this experiment we tries to explore the main motivation theories and merge them
into a model of motivational process. Then, based on that model, we set an experiment to see what
steps of the motivational process are being influenced by the culture. This experiment, consists of a
group of tasks to be performed by participants from Morocco and Ukraine and the observation of
their behaviour towards them.
Figure no 1. The perceived overall motivation level
Moroccan and Ukrainian participants showed a virtually equal level of motivation for the
experiment.
Figure no 2. Impact des spécificités des tâches sur le niveau de motivation
Moroccan participants were much more sensitive to complexity but were more resistant to
ambiguity. While Ukrainians were mainly stimulated by complexity and relatively disinterested in
simplicity. But how did this motivation translate into perseverance?
Figure no 3. Time allowed for each task type
The Ukrainian participants had more difficulty with the ambiguous instructions which
explains their demotivation.
Figure no 4. The overall level of motivation perceived under the impact of deadlines
All participants showed a relatively equal level of motivation in the absence of deadlines,
however, Ukrainians felt relatively less willingness to tasks with deadlines.
Figure no 5. Impact of the difficulty on the motivation felt
The function of the inverted U was clearly seen in both groups, which confirms the theory of
Yerkes et Dodson (1908).The more the difficulty increases the more one is motivated, but starting
from a certain level of difficulty, one begins to discourage.
Figure no 6. Relationship between the probability of perceived success and the level of
motivation
As affirmed Locke(1990), Atkinson (1957) et Vroom (1964), the greater the likelihood of
perceived success, the more motivated the individual.
Figure no 7. Level of resignation
Moroccans were more likely to abandon the exercises.
Figure no 8. Abandoned Tasks
Resignation was common to Moroccan participants, regardless of the nature of the tasks.
Figure no 9. Impact of the Difficulty on Abandonment
The greater the difficulty, the stronger the resignation is, especially among the Moroccan
participants.
Figure no 10. Respect the deadlines
The Ukrainians were closest to the deadline with only 0.3 minutes of average difference,
while the Moroccans scored a difference of 1.6 minutes ie a difference of more than 5 times
Ukrainian participants.
Figure no 11. Relationship between the respect of deadlines and the specificities of tasks
For almost all tasks the Ukrainian participants remained close to the deadlines when
finishing / abandoning before or after the deadline.
However, the Moroccans dropped an average of 1.7 minutes before the expiry of the deadline (an
average relatively biased by the large number of abundant players in the first few seconds, while the
Ukrainian participants stayed there Average 2 more minutes.
Qualitative results:
- Moroccan participants tended to communicate and help each other, although they were
aware that it was an individual job. In contrast, the Ukrainians worked individually and
refused to communicate with each other or with the experimenter.
- The Ukrainian participants asked few questions to understand the conditions of the test.
While for Moroccans the majority of respondents did not read the written questions and
asked for oral explanations instead.
- The average length of time spent on tasks:
o Ukraine: 75 Minutes
o Morocco: 45 Minutes
- Tasks 14, 16 and 17 were intentionally removed from the experience support to test the level
of involvement. At this level the participants, Moroccans have noticed their absence but did
not announce the remark because they considered it a "simple error". The Ukrainian
participants have for the most part made the remark to warn the experimenter.
The importance of this work is about understanding if yes or no, the motivation can vary
from a culture to another, and what specific elements can actually vary. These answers would
attract further questions for following researches as what specificities of cultures can generate what
precise influence on what element of the motivational process.
5. CONCLUSION
In a world where business is becoming more and more multinational, an approach of
motivation that takes the culture into consideration seems to be of a great importance. For such
reason, the question of motivation across cultures is raising. In order to settle this question, we led
this experiment to show if the motivational process is the same across cultures and “where” the
differences between cultures raise when motivation is regarded. The series of tasks given to the
participants have shown how the perception and sensitivity of the participants towards some
elements of the tasks and the conditions of work can vary.
Due to the sample size of the subjects of the experiment, the conclusions can hardly be
generalized on the mother populations. However, on the basis of the results we have, we can say
that the motivation process is the same in all cultures, and the motivating elements are the same.
Yet the impact of the specificities of the tasks and record greatly influence the level of motivation.
In addition, manifestations of motivation may vary according to cultural characteristics, so some
cultures will pay more attention to deadlines, be more likely to persevere, prefer oral explanations
and feedback or even be more sensitive to the ambiguity than others.
BIBLIOGRAPHY
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collectif des IAE
Prof. Assoc. PhD Dorina ȚICU
Departament of Political Sciences, International Relations and European Studies, "Alexandru Ioan Cuza" University of Iași, Romania
Abstract:
The present article proposes to observe what are the changes in the local public administration, through the
rational actor model, seen as the model identified as beeing dominant at this level, based on a research made in 2013.
Based on a case study applied to the Vaslui City Hall, the article resumes the research performed in 2013, in the year
2016 in order to highlight if there are some changes in the model, in terms of the actors involved at this level.
Key words: local public administration, actors, decision, rational actor model, decision making process
JEL classification: D60, D70, E27, E61
1. INTRODUCTION – THE PUBLIC ADMINISTRATION AND THE DECISION-
MAKERS
In general, through the public administration we can mean that institutional structure and
institutionalised that aimes to solve the public problems,to implement public policies, to provide to
a community public goods and services.
Ensuring these aims is the preserve of the actors involved in the decision-making process,
regardless of their form of organization. Thus, there is not only a typology of the actors involved in
the public sector, they may be individual or collective; institutionalised or non-institutionalised;
legislatives, executives, legals; central or regional, or local, etc. Moreover, „the level of the
involvement of the various actors can vary over time and in different moments of the process of
drawing up a public policy may involve new players” (Howlett, Ramesh, 1995, 29).
This is important because, on one hand, the actors are those who determine the institutional
processes and mechanisms, on the other hand, their study must be maintained beyond the
institutional identity itself, because the latter one has a tendency to put its mark over the identity of
each decision-maker in part.
From this point of view, to the public sector, as we talk about the institutional mechanisms
and processes, so we have to understant the actors make that processes, who may have their features
beyond the institutional ethos.
2. THE ROLE OF THE ACTORS IN LOCAL PUBLIC ADMINISTRATION
For S. Fernandez and H. Rainey, the role of the actors at the administrative level (the local
administrative level) is a multiple one, as follows (Fernandez, Rainey, 2006, 168):
-ensure the needs-through the need we understood the need for change of the institution
-to provide a plan – to provide a plan to implement the administrative activities (also those
who supposes changes)
-to build a certain degree of support of its activities at the level of the institution
-to take commitments at the highest managerial level
-to build links in support of the institution’s activities with external actors
-to ensure resources for its activities
-to institutionalize their activities.
Beyond these activities that determine the traits of the actors on this level, we can observe
that the decision-maker, seen as well as an individually actor, shall be subjected to the
administrative environment, and also brings with him a number of features that are activated at this
level, with greater or lesser support.
It can be said that ”the organizational actors within networks face the challenge of balancing
their separate organizational missions and institutional autonomy, strategic priorities, and service
delivery protocols with their network collaborative goals and roles” (Kenis, Provan, 2007, 229).
Thus, ”the organizational actors must be able to sustain relationships and negotiate
successfully in a terrain of multilateral ties with shifting responsibilities and fluid roles within the
networks”(Romzek, LeRoux, 2012, 442).
Adding the fact that all of these traits of the actors are specific to the rational actor model,
we can add a few dimensions of their work. The rational actor model started from the rational
behavior analysis, analysis realised in 40’s from John von Neumann and Oskar Morgenstern in
„The theory of games and economic behavior” (Neumann, Morgenstern, 1944). After, the
researches were continued by J. Savage (1954) (Savage, 1954), A. Downs (1957) (Downs, 1957),
Simon, Buchanan and Tullock (1967) (Simon, Buchanan and Tullock, 1967), J.S. Coleman (1973)
(Coleman,1973), Turner (1991) (Turner, 1991), etc. In terms of the actors involved, this model
supports the individual to the level of the administrative organizations, the individual seen as an
independent entity with a degree of freedom, but supported also as a part of the organization.
We will try to keep in mind all these features at the level of this analysis on the basis of their
development over time.
3. METHODOLOGY AND SAMPLE
The general working hypothesis. The present analysis aims to operationalise the rational
actor model (A. Downs), from the perspective of the actors involved in the decision-making
process, based on the results of two investigations since 2013 [1], resumed in 2016 [2] at the level
of Vaslui city hall. The present analysis proposes to identify the dynamics of the actors involved in
decision-making process, starting from this temporal analysis.
The research sample is made up of 212 respondents, employees of the Vaslui city, meaning
about an average of 26.04% of the total population of civil servants from this institution (814). The
construction technique of the sample was that of the “snow ball” (Miftode, 2003, 156) (see Table
1).
Table 1
1.City hall
2.No employees 3.sample
Vaslui 2013 407 [3] 106
Vaslui 2016 407 106
E: 814 S: 212
The tool used at the level of this research is the questionnaire. It was drawn up to meet the
auto-aplied technique, having in it content also closed and open questions.
4. RESULTS
To identify who are the actors involved at the institutional level, in 2013-19.2% of
respondents considered that there are individuals or certain groups especially established, and the
percentage drops to 12.9%; in 2013-13.7% claimed that the individuals in singular way, and certain
groups that may be involved along the process, so that the percentage decrease in 2016 at 8.9%; in
2013-67.1% claimed that the institution as a whole, so that in 2016 to increase at 78.2% (see Figure
1).
If for the first two items of variable 1, the percentages are decreaseing with the passage of
the time, the third increase in 2016 with 11,1%. In other words, it emphasizes the role of the
institution's overall involvement in decision making process in comparison with that of the
individual. There is not exluded the actors role at this level, but it seems that the institutional
climate is more important and it became more important in time.
Figure 1 – variable 1
For the variable 2, we are dealing with an amendment to the order of the percentages of the
items. If in 2013, the descending order of items was 3 - 1- 2, in 2016, this is reversed: becoming 1-
3-2. Why this is important, because we conclude that in the year 2016, there is the greatest
valorisation for decision-making groups laid down from the start, but that may change over time,
from those who can no longer suffer any change until the end of the decision-making process (see
Figure 2).
Figure 2 – variable 2
This shows a certain degree of decentralization at the level of the group's investment in
decision making process in relation to the existing hierarchies at the level of collective
administrative decision. It is worth noting that the percentages are very close to both this item for
2013/2016 and comparing the item 1with item 3 of the variable, which stipulated the strict structure
of the group (see Figure 2).
If in 2013-20.5% assert that those who take decisions are within the institution, so that in
2016 the percentage decrease to 17.4%; in 2013- from 2.2% to 3.3% increases the percentage in
2016 for the existence of the external actors; and if in 2013-76.7% supporting clear delineation of
those who decide, their percentage rises from 79.3% in 2016 (see Figure 3).
Figure 3 – variable 3
It should be noted that there is a certain degree of administrative decentralization, both
external, but mostly internal, features that are generally specific to the public space.
If in 2013 - 79.4% claimed that those who take decisions are not independent, their
percentage drops to 78.2% by 2016; in 2013-17.5% claiming that there is a certain degree of
freedom, the percentage drops to 15.1% in 2016; 3.2% claimed that they are quasi-independent, so
that in 2016 the percentage to rise to 6.7% (see Figure 4).
Thus, the degree of independence of the actors seems to follow the same general dynamics
as well as in other of the previous variabiles: it tends more towards the institutional consolidation,
not beeing tottaly excluded a degree of decentralization, of freedom.
Figure 4 – variable 4
According to Figure 5, if in 2013-13.4% claimed that the group has a unitary character, in
2016 the percentage increased to 24.6%; in 2013-11.9% hold his mobile character, then the
percentage drops to 8.5%; and if in 2013-74.6% supporting the clear structure, the percentage drops
to 66.9%.
Figure 5 – variable 5
If in 2013-56.9% claimed that hierarchies are recognized, the percentage increase in 2016 at
71,4%; 26.4% claimed in 2013 that are recognized, but not rigid, in 2016 the proportion falls to
18.5 percent; If in 2013-16.7%-susteined that are recognized, but in practice they are impossible to
achieve, by 2016 the proportion falls to 10.1% (see Figure 6). For all the itemii of this variable,
there is a fairly large difference according to their evolution in time, of more than 5%.
Figure 6 – variable 6
If in 2013-21.4% believed that there is a distance between driving and running, in 2016 the
percentage increases to 24%; for 2016-the percentage falls to 31.2% for those who believe that
employees can drive and execute; and for those who think that superiors lead and servants execute,
the percentages are increasing in 2016 to 44.8% (see Figure 7).
Figure 7 – variable 7
In 2016 the percentage of those who argue that actors always take good decisions increases
(38,1%); if in 2013-59% claiming that actors can go wrong sometimes when they are making
decisions, the percentage drops to 43.7% in 2016; and if in 2013-13.1% claimed that the actors can't
go wrong as such they would violate the rules, the percentage increase in 2016 at 18.3% (see Figure
8). The whole trend of this variable seems to express that the errors of the actors were increasingly
excluded from the decision making level.
Figure 8 – variable 8
For the variable 9, the dynamics over the years 2013-2016 is different: If in 2013 was the
most recognized that the personal motivations are recognised and can be influenced by the
decisions already taken, in 2016- it matter most to recognize that personal motivations, but there are
subjected (see Figure 9).
In this case, for the year 2016, the percentage of those who argue that personal motivations
are recognised and can be influenced by the decisions already taken is similar to that of those who
believe that individual motivations exist, but the most powerful actor wins.
The evolution of this variable produces (as in the case of variable 2) a totally different
mutation at the level of general rational actor model. If in 2013, at the level of administrative
institution, the items of two varibiles (2 and 9) showed more incremental developments and of the
bureaucratic organization, at administrative level in 2016, they produce a stronger activation of the
rational actor model.
Figure 9 – variable 9
If in 2013-56.9% claimed that those who decide eliminates dissensions, errors, in 2016 their
percentage drops to 46.7%; in 2013-18.5% claimed that decisions are made after models made in
practice in order to eliminate the dissensions, and in 2016 the percentage rises to 33.3%; and if in
2013-24.6% claimed that they prefer the alliances between those who decide instead of the
disagreements, so that the percentage decreases then to 19% (see Figure 10).
Figure 10 – variable 10
If in 2013-50.8% claiming that there is a strict control on the part of the superiors, the
percentage increases in 2016 to 74,6%; If in 2013-18% claimed that there is not a strict
surveillance, the percentage drops to 11.1% in 2016; and if in 2013-31.1% claimed that they prefer
alliances between those who decide in order to cause some degree of control over employees, the
percentage drops to 14.3% in 2016 (see Figure 11).
Figure 11 – variable 11
It may be noted that during the three years, the largest percentage difference occurs in the
case of this variable: for the year 2016, the percentage of those who believe that there is a strict
control on the part of superiors increased with 23.8%. In the case of the three items of this variables,
the differences between percentages over years are high: over 7%.
In relation to the rational actor model dynamics at the level of the local government in the
city of Vaslui (in this case, the City Hall), we can state that the administrative evolution is not an
extremely different one for the variables 1, 3, 4, 5, 7; the variables 6, 8, 10, 11 record at least in the
case of an item more visible differences in the evolution of the percentages in the range 2013-2016,
and the variables 2 and 9 produce a modification of the hierarchy of the variables items.
5. CONCLUSIONS
The public administration is in a continual dynamic both locally, regionally or at the
national level, which is produced both of the changes arising from the environment and which can
have a prejudice to the public sector (in the present case, for example, involving the diversification
of the actors coming from outside the administrative institution), and inside the institution, by
activating differently the institutional actors.
The present analysis has shown that the local public administration (in this case, the city of
Vaslui) is subject to a general dynamics involving both the maintain of a certain degree of
bureaucratic centralization, and the granting of a degree much greater to the actors, both the
centralisation on the basis of the organisational structure, as well as of a type of freedom of
movement of the institutional structures (Office, department, etc.), both the actors recognition and
of the decisions of the individual, of the group, or the holistic ones, at institutional level.
It can be noticed that over the years, the local public administration has developed a model
of the rational actor with incremental dimensions and of the bureaucratic organization, but in time,
the evolution at this level has been one of the rational actor model features, and of the rational logic
of the actors.
This evolution at the level of the local government may be assimilated in the evolution of
society itself, in the sense of not losing sight of the principles of the marketisation, the application
of the principles of the market in the public sector with the aim to measure much more the
performances, the amount of the goods and of the services, etc. From this point of view, the present
analysis seems to open up a line of the new public management that could be applied (with each
institution mostly, in separated cases) at the level of the romanian local public administration.
ACKNOWLEDGEMENT
1. This work was supported by the European Social Fund in Romania, under the responsibility
of the Managing Authority for the Sectoral Operational Programme for Human Resources
Development 2007-2013 [grant POSDRU/CPP 107/DMI 1.5/S/78342].
2. This study was supported by the Sector Operational Programme Human Resources
Development (SOP HRD), financed from the European Social Fund and by the Romanian
Government under the contract number POSDRU/159/1.5/133675.
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Assoc. Prof. PhD Olha DANILOVA
Department of Economic Geography and Environmental Management Chernivtsi Yuriy Fedkovych National University, Ukraine
Assoc. Prof. PhD Nataly ZABLOTOVSKA Department of Geography of Ukraine and Region Studies, Chernivtsi Yuriy Fedkovych National University, Ukraine
Magister of Management Inna PASHANIUK Pr-manger NGO Bukovinian Center for Development and Reconstruction, Ukraine
Abstract:
Eco-marketing trends of hotel industry development are examined. Major factors that effected on the
appearance of eco-hotels are disclosed, as well as eco-hotel environmental and economic benefits are discussed.
Classification of both eco-hotels and organizations involved in eco-certification is suggested. Problems and prospects
of eco-hotel development in Ukraine are analyzed.
Key words: ecological marketing, ecological hotel, ecological certification, socio-ecological hotel, benefits of
ecological hotels.
JEL classification: F16, F17, Е40, Е60.
1. INTRODUCTION
Covering a wide range of economic activities, tourism is fairly regarded to be the most
powerful industry in the world whose growth rates over the last years have exceeded the same of all
other sectors of world economy. Following the oil and chemicals producing industries, tourism
occupies the third place in the structure of world export leaving the food and motor industries
behind. The revenue gained from international tourism was $1.4 trillion in 2015 with its world GDP
share growing to 9% thus providing for 1/11 workplaces and 30% of world service exports [1].
Hospitality is an integral part of tourism industry. Hasty growth of hotels and aggravation of
associated problems mainstream the need for new vectors of their development, e.g., introduction of
eco-marketing initiatives in the practice of functioning of present-day hotel industry.
Ecological marketing as type of entrepreneurship aims at detection and satisfaction of
environmental needs of both individual consumers and the public on the whole in a better way than
that of the business rivals, which provides for company competitiveness and efficiency [2, 3].
According to J. Ottman, ecological marketing represents economic activity of companies aiming at
delivery of ecologically-oriented products, formation of ecological demand, and bringing all their
resources in compliance with market requirements and opportunities with the purpose of receiving
profit and causing no harm to the environment [4].
Ecological marketing premises on the concept of social-ethical marketing and is an integral
part of the latter [2, 5]. It was formed at the intersection of such components of society development
as satisfaction of solvent purchasers’ ecological needs, environment preservation and company
profitability, and eco-hotels thus arouse due to ecological marketing as an innovative concept of
hospitality.
The questions of eco-hotel functioning, classification, and provisions for their certification
were discussed in publications of predominantly foreign researchers and organizations involved in
eco-hotel environmental certification [6-13]. “Eco-Hotels of the World” by Alex Conti deserves
particular attention, since highlights ecological hotel activity at different continents and provides
arguments in favor of their environmental and economic benefits [6]. With respect to domestic
researchers, we would outline the works by Iu. Adrianova, M.T. Hostiuk, and N. Yemelianova, etc
dedicated to problems of eco-hotel certification and operation [14, 15, 16].
Limited number of publications in this area of studies, especially with respect to Ukrainian
scientists, necessitates further research, since no consistent approach to the concept of “eco-hotel” is
yet developed, nor single-valued criteria to meet international practice are elaborated. Besides, there
exist substantial differences in approaches to eco-hotel certification by various organizations.
Hence, the objectives of this study lie in generalization of the criteria that would make hotels fit the
“eco” status; development of our own eco-hotel classification with consideration of the consumer-
environment-local community direct and inverse effects; and disclosure of the perspectives of eco-
hotel industry in Ukraine.
2. STUDY RESULTS AND DISCUSSION
In conditions of growing exhaustion of planet’s resources and but a few government
programs oriented towards the use of energy-efficient systems and technologies, the nature often
responses our predatory consumer instincts with catastrophes and disasters. And it is not until then
that we start thinking of how to preserve our enduring planet from our consumer fancies.
This also pertains to hotel business. Individually, hotels exercise no significant impact on
the environment. However, their combined effect can be very wasteful consuming too huge
amounts of resources. Experts estimate that 75% of the hotels’ environmental impact is directly
related to excessive consumption [8].
Energy, water and waste are the three key impacts on the environment. In particular, the
hotels average daily per bed energy consumption can make nearly 130 mJ. Hotels are powerful
water consumers. It was estimated that 100 luxury hotel guests will consume water in the course of
2 months in the amount that would be enough for 100 urban families in the course of 2 years [13]. It
was also established that hotels are not only intense energy and water consumers but simultaneously
produce waste that is one of the most telling environmental impacts. On the average, hotels daily
produce over 1 kg of waste per visitor. It was also established that an average hotel daily emits 20.6
kg of carbon dioxide [17].
Aggravation of hospitality-associated problems gave rise to the development of eco-hotels.
Ecological hotel represents environmentally certified accommodation aiming at improving the
environment by way of minimization of its own environmental impact. Eco-hotels as innovative
concept of hospitality possess several attributes that make them different from usual hotels. Such
hotels depend on the environment; they are ecologically sustainable and add to nature preservation;
they are provided with environmentally trained stuff; they incorporate local culture specificities;
and they provide for economic returns to local communities [18].
Besides, ecological hotels should keep to strict “green” guidelines to ensure that their guests
stay in safe, non-toxic and energy-efficient premises.
Major criteria that must be met by eco-hotels are the use of renewable energy sources such
as solar or wind energy; energy-efficient lighting; recycling of grey water used in the kitchen, bath,
laundry, garden and greening; fresh-air exchange systems; waste utilization programs; non-toxic
cleaning agents and laundry detergents; 100% organic cotton bed-clothing; non-smoker suites;
green vehicle transportation; organic and local-grown food service; non-use of disposable tableware
[18].
The use of eco-materials in construction of eco-hotels is, to our opinion, another equally
important criteria.
Certification of hotels by the third party or the competent authority of the state where the
hotels are located should be a mandatory condition to assign them the status of “eco-hotels”.
Ecological certification is a system of eco-mark tourism establishments that aim at reduction
of tourism operation objects’ pressure on the environment by way of rewarding, promoting and
stimulating of useful initiatives and introduction of ecological methods of tourism management.
We suggest that existing ecological certifications were classified on the grounds as follows:
1) the territory of coverage:
- International (ISO 14001, EMAS);
- National (“ANAB” in the European Union);
- Regional (“Blue Angel” in Germany);
2) the objects:
- Certification of goods (“ANAB” in the European Union);
- Certification of services (“Green Globe”, “Blue Flag”);
- Mixed (goods and services) (ISO 14001).
3) the number of the criteria.
Certifying the hotels and assigning them the “eco” status, competent bodies usually apply
different evaluation criteria that as a rule describe their impact but do not assess the environment
itself. This discredits the essence of said status with respect to hospitality establishment if it
functions in anthropogenically transformed urban environment.
We tried to classify eco-hotels taking into account direct and inverse impacts existing
between the consumer, the environment and the local community. In this respect, we suggest that
ecologically-oriented, properly ecological and socio-ecological types of hotels should be outlined
(see hotel functional schemes presented in Fig. 1, 2).
Satisfying the demands for environmental services, ecologically-oriented hotels execute
their own ecological policy with respect to the environment that always meets the prescribed
requirements. Their performance is distinctive for direct and inverse relationship with the guests
(provision for eco-services of accommodation formation of eco-services demand) and
direct influence on the environment preservation through introduction of ecological policy into
practice of their functioning (see Fig. 1). However, the requirements imposed to surrounding
environment in which the eco-hotel is placed still stay beyond consideration. Such hotels (where
resource-preserving technologies are introduced, ecologically-oriented requirements are considered
and to whom the eco-labels are assigned) can operate in big cities and locations (e.g., Radisson Blu
4* in Kyiv (Green Key’s certification), Regent’s Garden Hotel Paris in Paris (EU Ecolabel
certification). Their contribution to environmental preservation is doubtless, but it seems rather
inappropriate to assign the eco-status to those placed in the environment which does not meet the
eco-standards due to surrounding’s pollution by vehicular and static sources, etc.
Figure 1. Scheme of functioning of ecologically-oriented and properly ecological eco-
hotels
To our opinion, the properly ecological hotels are those that meet the demands of eco-
services operating in an environment that meets ecological requirements, and their activity fits the
criteria of ecological certification. These hotels consider direct and inverse relationship with the
guests (provision for eco-services of accommodation formation of eco-services demand)
and direct/inverse relationship between the hotel and its environment (hotel’s influence on the
environment preservation through introduction of ecological policy into practice of their
functioning, environmental requirements environmental fitness to eco-requirements) (see Fig.
1). Placed in the village of Dolishniy Shepit, Chernivtsi Region, an ecologically pure locality, the
“Kovcheg Hotel” is a vivid example of properly ecological hospitality establishment. The hotel is
awarded a “Green Crane”, a world-recognized label that meets the ISO 14024 (ДСТУ ІSO 14024)
standard, is included into the register of the Global Ecolabelling Network (GEN), and is recognized
by 27 certification systems in 60 world countries.
Socio-ecological hotels to their best satisfy socio-ethic concept of eco-marketing, since, in
addition to being located in ecologically clean environment and full satisfaction of their guests’
ecological demands, they promote economic development of local communities on whose territory
they operate (see Fig. 2).
Figure 2. Scheme of functioning of eco-social hotels
Outlining of this type of hotels is connected with the advancement of the concept of res-
ponsible tourism which makes the tourist’s travel more significant and still more beneficial for the
host party. The concept was given a boost after the 2002 Cape Town Conference on Responsible
Tourism in Destinations. The Declaration signed by representatives of 20 countries attending the
Conference, has outlined two major goals of responsible tourism: provision of economic benefits to
local people with improvement of their well-being and encouragement of benevolent and attentive
relationship between the traveler and the local community [20].
Socio-ecological hotels appeared as part of realization of these goals. They are placed in
localities that necessitate assistance in solution of certain problems (e.g., provision of food supply
security on both local and regional levels), and, beside employment, offer services of education and
consulting (e.g., in the area of sustainable agriculture).
If ecologically-directed (-oriented) and properly ecological hotels majorly accentuate on
introduction of resource-preserving technologies and minimization of their environmental impact,
socio-ecological hotels, beside the aforesaid issues, concentrate around the promotion of externally-
oriented companies that are of particular importance to local community.
Performance of the “Strawberry Fields Eco-Lodge” (SFEE) in Ethiopia is a good example of
functioning of socio-ecological hotel. The establishment is a socio-oriented and ethical investment
project founded in Konso (Karati) in 2007-08. It integrates the eco-hotel, the model of a permacult-
ural farm and garden, the organic restaurant, educational center for computer design, and starts the
program of excursions and community culture events. The project aims at encouragement of the
Konso community to alternative livehood by way of involvement of local people into tourism
activity, and at provision of food security on a local and the Ethiopian levels offering educational
and consultative services on permaculture for local, national and international interested parties
[21].
Ecological and socio-ecological hotels are alternative but mutually beneficial; by way of
hospitality, they form better relations with local communities and ultimately provide the best
experience to travelers.
Development of ecological hotels is a promising trend in the hospitality industry of Ukraine.
In particular, there was significant progress in introduction of ecological certification of
hotel industry companies within the last years in Ukraine. The state authorities permitted the entry
of the “Green Key”, an international program of hotel and resort ecological certification [19], the
one out of five projects by “Foundation for Environmental Education”, an international non-
government independent organization, as well as they introduced the state certification, developed
by the “Green Dossier”, an information center [22].
The “Radisson Blu” certified by the “Green Key”, the “Kosiv Hotel” and the “Zhyvytsia”, a
private homestead certified by the “Green Dossier” were the first eco-labeled objects of hospitality
industry in Ukraine and the “Kovcheg” eco-hotel eco-labeled with the “Green Crane”. Today, the
“Green Key” standards are met in Ukraine by two “Maison Blanche” eco-homesteads (Kyiv Oblast,
villages of Berezivla and Mytnytsia), “Radisson Blu 4*” in Kyiv, “Ligena 4*” hotels in Boryspil.
Major existing pre-conditions that favor the development of eco-hotels in Ukraine are as
follows: availability of recreational resources and territories suitable for eco-hotel disposition;
formation and development of the industry of environmentally certified building products;
availability of fair number of educational institutions to train experts in hospitality; availability of
scientific and research centers specializing in the development of energy and water-saving
technologies, and training experts for that purpose; formation of the industry of ecologically clean
foods products; availability of wide range of additional services; easement of tax pressure on
hospitality industry.
Among negative trends that slow down the eco-hotel industry practice we would emphasize
on the lack of developed infrastructure within hotel-suitable territories; negative image formed in
response to the Chernobyl incident; absence of universal eco-hotel state certification; high costs of
environment-friendly products; improper state environmental control in the area of production of
building materials; lack of eco-hotel industry practice; people’s insufficient awareness of eco-
hotels.
3. CONCLUSIONS
Ecological hotels are meant to solve problems of rational economic and ecological
functioning of accommodation establishments. We interpret the eco-hotel to be an ecologically
certified dwelling that that aims at improving the environment by way of minimizing of its own
environmental impact, and is located in an ecologically pure territory. Within the context of the
“eco-hotel” we should discern between ecologically-oriented, properly ecological and socio-
ecological hotels.
Successful operation of an eco-hotel requires availability of three components such as
natural territory, ecological certification by an independent third party, and the hospitality
establishment’s balanced environmental policy.
Further development of eco-hotel industry is a promising trend for this country, since its
territory possesses great number of land areas fitting the construction of eco-hotels; the territory of
the region is poorly industrialized; there exists sufficient number of establishments to instruct
experts in hospitality; foreign investments in the hotel industry tend to grow, the same as eco-hotel
demands of domestic and foreign tourists, etc. Unfortunately, these obvious pluses are still not used
to their best advantage.
It is much due to this state’s stimulation of introduction of the companies’ energy and
resource preservation technologies beginning from 2014 that properly ecological and ecologically-
oriented hotels now tend to further development. Financial saving is among the most important
factors that would effect on realization of ecological initiatives in hotel business. It is especially
clear to hotel companies that perform in highly competitive market where the cost of energy, water
and wastes is highly money-losing. Hotel operators who are able to maximize their efficiency
would become more economically rational than their competitors.
The scientists who research in the area of eco-hotel industry see their present-day tasks in
urgent development of universal scheme of ecological certification, and formation of mechanisms
to implement green initiatives in small, medium-size and large hospitality companies.
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19. “Green Key”, an Official Site of International Certification [Electronic resource] –
Access mode: http://www.greenkey.global/ 20. Cape Town Declaration on Responsible Tourism [Electronic resource] – Access mode:
http://www.capetown.gov.za/.
21. Official site of the “Strawberry Fields Eco-Lodge” [Electronic resource] – Access mode:
https://www.permalodge.org
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Access mode: http://www.club9000.org/en/list14000.php
Assistant professor, PhD in Economics Tatyana ZAVOLICHNA
Yuriy Fedkovych Chernivtsi National University, Ukraine Department of Theoretical Economics, Management and Administration
Associate professor, PhD in Economics Iryna ZRYBNIEVA
Yuriy Fedkovych Chernivtsi National University, Ukraine Department of Business Economics аnd Human Resource Management
Abstract:
In the article the authors investigated the state of land reform in Ukraine evaluated the prospects of its
development following on from the experience of Bulgaria, Romania and Hungary. An innovative algorithm of change
management in the system of administration of land relations was suggested, which role is to provide opportunities to
expeditiously manage land conversion, effectively overcome resistance to change.
Key words: land relations, land reform, reflexive management, price of land, antroposocial, organizational and
functional contexts.
JEL classification: E02, H83, Q15
1. INTRODUCTION
Land reform in Ukraine already lasts for 26 years. Current land conversion in Ukraine is
aimed on laying the foundation of a new land system that involves changing economic thought of
government officials, land owners, tenants, investors, villagers and all citizens. Of course, in the
early period of transformation there is resistance against change in society. However, land reform
Ukraine is one of the slowest, politicized and controversial reforms. Development of land market
continues with numerous violations of applicable laws, interests and rights of its subjects (illegal
corruption transactions with the land, raiding, lack of full open cadastre registration system). It has
to be admitted that there is a universal rejection of land reform by Ukrainians, for example, only 7%
of people state positive about land policy, more than 24% - do not know anything about this policy,
61% of respondents believe that the introduction of a free land market should be put to a national
referendum; 34% identify the sale of land with speculation (Mischenko, 2012). Resistance of the
public is a major obstacle to cancel the moratorium on the sale of agricultural land. Each year
moratorium "steals" 90% of potential income from 7 mln. of land holders, and does not allow to
implement the potential for the largest area of arable land market in Europe (Zrybnieva, Zavolichna,
2017).
Thus unsolved problems and fears that arose during the prolonged land reform in Ukraine
directly and indirectly reduce the effectiveness of public relations. This causes an immediate need
for innovative approaches to governance reform changes in the system of land relations in the
conditions of multidirectional problems, environmental uncertainty and lack of feasibility of direct
management.
Problems of theory, methodology and practice of the land relations transformation to the
market condition are disclosed in scientific researches of: Fedorov, 2009; Ahner & Scheele, 2000;
Martin, 2011; Ciaian, 2012; Pronina, 2014; Skydan, 2015; Khodakivska, 2016; Mesel-Veseliak,
2016; Tretiak, 2016; Zinchuk, M., 2017. Numerous studies of problems of land relations
conversion not reduce their relevance, but rather exacerbate them because the land being a property
of the Ukrainian people is used inefficiently. Therefore, special attention is need dedicated to
studying the real situation and current trends, studying national and world experience regarding the
optimization of the process of market self-regulation and government intervention in land relations
based on reflexive management.
DISCUSSION AND RESULTS
Among a number of socio-economic reforms conducted in Ukraine most pressing and
controversial is the land reform. It is recognized that land issues are the basis of domestic food
security and its ability to respond to external challenges. Ukraine has about 1/4 of world reserves of
black earth, and the rate of agricultural land per capita is the highest among European countries -
0.9 hectares. The state has a priceless national treasure, capable with effective management to
ensure a decent standard of life of citizens, potential resources to restart and develop the economy.
Specialists of World bank (2016) estimate the total economic impact from the launch of the "free
market of agricultural land" already in 2020 ranging from 40 to 105 billion $. In general, the
agricultural sector of Ukraine today can be invested more than all of Europe combined.
However, due to inefficient management of the process of land relations conversion to
market, today 58% of rural workers who live on the land, which is projected by scientists as being
able to feed 300 million people, are on the brink of survival. It has to be noted that the land fund of
Ukraine is distributed between land users and land owners, whose composition is dynamic and
diverse. In particular, during the implementation of land reform in rural areas 27.5 million hectares
of agricultural land were transferred into private ownership and more than 6.9 million people (or
97%) have issued public acts on the ownership of land. About 50% of the country's agricultural
land is currently owned by farms, including 25% of the land area of 20-50 hectares; 13% - 100-500
hectares; 10% - up to 5 hectares. Less than 2% of companies make large landowners of agricultural
land of more than 3 thousand hectares, but they own more than 45% of the total distributed between
subjects of farmland business (see The State Service of Ukraine for Geodesy, Cartography and
Cadastre).
This gives reason to believe that the destruction of the monopoly of state land ownership
and distribution of agricultural land in the country did not provide the organization an effective
agromanagement and forming a transparent land market, but rather practically deprived real
manufacturers of underlying inputs and turned the land owners to recipients of income from renting
their own property use.
This disappointing conclusion is confirmed by the results of comparative analysis of land
reform in countries similar to Ukraine according to the criteria of land quality, with the past history
of management in the planned economic system, time and purpose of beginning the transformation
to the market (see table number 1).
Successful experience of our neighbours proved that the rejection of the idea of monopoly
of state ownership of land during the land reform has meant that the state of the public entity only
gradually become an equal participant of land market. There were changes in existing individual,
group, public consciousness of mental schemes of land reforms, resulting in significant changes in
emphasizes in the management of land relations.
Ukraine and its neighbours - new EU members started the process of land reform together.
However, our neighbours had a land reform through restitution of land allocation on auction
followed by staged liberalization access to foreign capital. All these economies have gradually
introduced or fully opened land market, or the market of the derogation. For example, Romania
after leaving the sociobloc had a process of transferring land from state ownership to private by
both distribution and partial restitution. Restrictions on the acquisition of agricultural assets are
insignificant: buyer must have professional experience or qualifications in agribusiness
management. After joining the EU in 2007 a moratorium was introduced for a period of 7 years for
the sale of land to non-residents. In 2014 its term expired and the market became open to foreign
capital. Today already, in Romania, the average cost of 1 hectare of land (with fertility similar to
Ukrainian) is more than 6000 euros.
Table no. 1. State of land reform in the new EU countries and Ukraine
as of 01.01.2016
Indicators Bulgaria Poland Romania Hungary Ukraine
Total area, thousand hectares 11100 31270 23840 9300 60350
Agricultural lands, % 60,4 48,6 32,1 59,0 71,3
Area plowing, % 29,7 34,9 36,9 47,3 53,9
Start of land reform, year 1990 1990 1990 1989 1991
Share of agriculture in GDP, % 5,2 3,2 5,4 4,3 12,0
Rural population, % 27,5 39.0 44,1 31,4 31,0
Land in private property, % 98 81 94 86 73,5
Law limitations in minimum property
of agricultural land, hectares
does not
exist
1 does not
exist
does not
exist
does not
exist
Law limitations in maximum
property of agricultural land, hectares
30 up to 300, in
the case of
legacy – 500
100 300 100
Possibility of sale of agricultural land
to foreigners
limited limited allowed not allowed moratorium
Average price of selling 1 hectares of
agricultural land ($/hectares)
4650 10300 6150 moratorium 4500
Leased land, % 90,0 81,0 94,0 86,0 73,5
Rent adjustment market market market market law
Average rent, $/ hectares 187,5 314,6 120,0 125,0 37,0
Ration for rent value to the price of
selling agricultural land, %
4,03 3,05 1,95 2,77 -
Source: Own elaboration according to the data provided by Eurostat, Ukrstat, EasyBusiness, VoxUkraine
EU citizens have access to purchase agricultural land in terms of its use as intended. So,
after joining EU agricultural land sales in Bulgaria rose by 45%, in Romania - the annual average
increased to 1.5%, in Poland about 0.9% of the land is sold at public auction, and a similar
proportion is sold through private sale (Eurostat, 2016). As a result, in these countries the price of
land (which is inferior compared to ours) is regulated by basic principles of the market and exceeds
the Ukrainian figures in several times. Accordingly, much higher prices are for land lease too - $ 37
USD in Ukraine, where the land market is frozen by moratorium against $ 300 USD in countries
with a free land market.
Unfortunately, in Ukraine the land reform allowed a number of corruption schemes of
"wasting" the earth, and created an untransparent control mechanism forming a negative attitude of
citizens to change and re-aggravating the issue of "land sale". Ukrainian peasants - land owners
actually are in a state of hunger for information, since 84% of respondents assess their awareness
about the land issue as "insufficient" (Nivievskyi, et al, 2016). In the absence of relevant economic
knowledge many of them are afraid of change and cannot make informed decisions about the future
of land.
As the UN European Economic Commission declares, an effective system of land relations
today must simultaneously be dynamic, cost affordable, open to every citizen, as well as meet the
needs of all its users, in particular to ensure ownership of the land and its protection, development
of land markets, protection of land resources and providing environmental monitoring, land
management to promote public lands to reduce the number of land disputes, improving the
development of infrastructure facilities in rural areas. Under such conditions use of new innovative
land relations management in the conditions of multidirectional problems, environmental
uncertainty and lack of feasibility of direct management becomes paramount. It should be methods
capable of providing comprehensive, multilevel governance that cover all elements of the system of
administration of land relations, coordinate management processes and government, external
demands and internal motives of the participants in the economic process, create space for
variability of management activities in accordance with the actual situation, while maintaining
strategic areas of development, promoting self-development system. It is important to realize that
most of the social and economic processes begin to develop long before they appear tangible
results. We need to learn to manage these processes since inception, which also needs to be
identified, examined and guide tracked.
In the same period of transformation, the state must take a leading role in the development
of land relations and management based on innovation. The results featuring "Westminster" (New
Zealand and the United Kingdom) and "American" (USA) models of building a "new public
management", which is currently considered the most effective model of public administration
reform in the world, have identified ten universal principles on public policy of land reform in
Ukraine has to be based in the future: 1) awareness of the urgent need for reform; 2) systematic and
complexity of reform; 3) maintaining the balance during the reform; 4) effective bringing to the
public of the content, significance and need for reform; 5) strategic orientation of reforms under
focus on short-term results; 6) highly professional public management; 7) radical reformatting of
many components of administrative management in a short time; 8) increasing the transparency of
the results of administration; 9) having a strategy of interaction and relationship between the state
and society; 10) control of reform changes in the management system. The last principle, in our
view, is a core benchmark for effective management system of the administration of land relations
in today's transforming economy, the essence of which is the need to manage change rather than to
passively depend on the changes. Such innovative approach to resolving new challenges in
management of land relations on the reflexive basis is the management that is based on multivariate
analysis of the entire management process and its elements, layout management reality, predicting
the results and consequences of decisions, choosing ways of solving problems meaning to achieve
objectives, organization of informational communication and correction of management process
flow.
Modern scholars have interpreted reflexive control as the transfer of basis for deciding from
one entity to another; as the ability to manage the situation to see from the side, to understand its
causes and predict consequences, manage the situation ahead of this other; a constant awareness of
the subject of management and behaviour patterns and behaviours of related hierarchically
subordinate objects (Lefevr, 2013; Lepa, 2010; Savytskaia, 2004). Based on these definitions, it can
be argued that the use of reflective approach to management of land relations overcomes the
uncertainty that is created by changes caused by the multiplicity of contexts of perception of
management reality and their mutual influence. Context is an abstraction, slice of reality, in other
words, the model useful for analysing reality. Contexts are formed over time, coexist, overlap,
complement each other and interact with each other. Understanding context - their dynamics and
influence – helps to predict the development, build models and strategies appropriate to surrounding
conditions. And to achieve this understanding is enabled by reflection, by focusing on existing
management contexts. Each administration focus builds its goals, manages the relevant processes,
directs and develops facility management in their specific field. From our point of view
implementing reforms in the administration of land relations should focus on the following three
contexts:
1) аntroposocial;
2) organizational;
3) functional.
Antroposocial context focuses management actions on human capital of the system of land
relations. Organizational context of configuration system management requires the definition
optimal parameters of the structure of the administration of land relations of different hierarchical
levels. According to the functional context radical redevelopment processes, technologies and
operations due to internal and external business communications and land management relations
should be made. It is emphasized that the destruction of existing processes and launch of new ones,
not tested enough, cannot occur simultaneously because this will lead to the physical destruction of
established processes, violation of prevailing social contacts and blocking communication channels.
An alternative way to change, as opposed to the destruction, has to be recombination - that is, new
combinations and new relationships of individual components of the system, leading to a qualitative
change its appearance. That is the idea of reform that should be revolutionary and its
implementation - evolutionary. Evolutionary recombination in the process of reflexive control will
release the potential energy of the system necessary for the large-scale land reforms. Potential
energy is able to be transformed into kinetic and cause further agrarian reforms that will result in
obtaining a synergistic environmental and socio-economic impact. Thus, in social aspect farmer
will have guaranteed land ownership rights, improved working and living conditions. In the
environmental field there will be created guarantees of technogenic and ecological safety of human
life, the preservation and enrichment of the environment. From an economic point of view
investment attractiveness of the agricultural land should be increased, but with a more rational use
of natural resources land efficiency will increase too.
From our point view, the organizational aspect of reforming the system of administration of
land relations should provide a gradual transition from hierarchical management structure to the
network (cross-process organization administering land relations) with the principles of the matrix
functionality businesses with permanent project teams, which have the advantage of: providing
flexibility and speed of response to changes in the environment by creating a network that
permeates the entire structure; activation of creative potential managers of active practice as a result
of mutual delegation of administrative functions; enhance the ultimate responsibility of each leader.
We believe that the appropriate measures are able to promote partnership in the system of
administration of land relations. In turn, reduce of administrative vertical pressure and horizontal
influences increase will lead to faster information processes exchange, enhance strength, can fulfil
the new conditions of management influence. At the same time should be provided with
information and organizational coherence of various parts of the management tree in the processes
of vertical (central government – region – district – self-governing territorial units) and horizontal
(ministry – ministry, region – region, district - district) transfer of management influence.
We believe that in terms of functional context for the administration of land relations
acquire certain utility business technology, particularly developed in the Orlikowski & Hoffman
management school, approach of radical remodelling processes in the field of the subject using the
latest technology management, such as: time management; quality management; Kaizen
philosophy; operating just-in-time; support of corporate culture; creation of functional working
groups; control priorities; measurement processes; development of communications and so on.
Despite its nature of a business, mentioned methods and control methods are capable to
significantly improve administrative processes in government management of land relations. At the
same time, innovations often cause rejection (active or tacit resistance neglect) due to the inertia of
mental structures of individual and collective consciousness and characteristic of all people that fear
the something new and unknown. Among the main reasons for resistance to change existing we
highlight the following: homeostasis system; inertia; custom power; lack of historical background
change; lack of resources; presumed benefits of the status quo subjects of land relations;
egocentrism; myopia; cynicism; conflict between mediocrity and genius of the individual group
members are not able to understand the feasibility of change; social conformity and ideological
contradictions. Since land relations gradually become market-based, the problem of overcoming
resistance to change can be solved by using the theories of change management in business (Coch
& French, 1969; Albanese, 1973; Waddell & Sohal, 1998; Fullan, 1999; Fernandez & Rainey,
2006). Particularly distinguished: empirical-rational strategy which content is based on the
hypothesis that people are only effective after confirmation the need and changes benefit; regulatory
behaviour strategy - which suggest that motivation and behaviour based not only on logic, but also
attitudes, values, interpersonal relationships, commitment and skills, so there is a need for detailed
analysis of the corresponding subjective factors; power-coercive strategies - which are based on
political or economic sanctions (positive and negative) and coercion.
The approach used in each case depends on factors such as the strength of the resistance
value of the target audience, success rate, availability of resources (human, time, financial,
information) and others. It should also be borne in mind that the strategy must be adaptive, as vital
is the system's ability to respond quickly to new situations and requirements management time and
space that inevitably arise.
The stated facts have become the theoretical basis for the development of universal
copyright control algorithm changes in the system of administration of land relations, whose role is
to provide opportunities expeditiously managed land conversion, effectively overcoming resistance
to change. The scheme of the algorithm shown in Figure number 1.
Figure no. 1. Management algorithm of changes in administration system of the land relations Source: Own elaboration
Our studies allow to conclude that the most effective world governance practices in the land
sector is based on maintaining optimal parameters of the administration system, which we consider:
1) creating of an advanced, but compact and mobile management structure;
2) transfer to market principles of traditional as opposed to bureaucratic and control
mechanisms while preserving "institutional memory";
3) ensuring optimal balance of centralization and decentralization in the structure of land
relations management through a combination of different forms of government: state, municipal,
farm and public;
4) smooth connections between bodies administration of land relations;
5) development of transparency (openness) control - expanding public participation in the
process of setting goals and programs of the land sphere.
Compliance with these system parameters based on land features as a unique socio-
ecological and economic object due to its multi-function values (spatial basis, means of production,
natural component of the complex, the property object).
CONCLUSIONS
Thus, we consider that the proposed algorithm is reflexive to control system administration
of land relations and will allow to solve urgent problems of land and agrarian reform in Ukraine
under different vectors objectives of public policy and uncertain environment and will promote the
synthesis of the interests of real capital, the state and the general population in land relations. The
modified control system is able to:
The third iteration
The second iteration
The first iteration
Strategic idea of changes
The analysis process of
necessary changes
Selection of team
performers
Analysis of possibilities of
structures that support the
process
Formation of commitment of
the masses (overcoming of
resistance to change)
Starting the process Achieving previous result for
the implementation of changes
Fixation of the Strategy The institutionalization of
process
Completion of the cycle
of changes
1) provide a change of emphasis administration target orientation of land relations in plane
playback intellectual, industrial and agricultural value;
2) help to overcome the negative effects stereotypes of historical transformation of agrarian
economy;
3) initiate institutional changes in the motivation of stakeholders in land reform areas of
negotiation scenarios of land reforms and their implementation constructing algorithms.
Redefining of administrative activities in the land relations on the basis of reflexive control
will contribute the balance of interests: the desire to counterbalance holdings and small farms to
maximize profits, the rural population - to a more equitable distribution of land resources of the
state - to social and political stability in land relations.
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PhD Student Claudia CIOBANU (BITEA)
Faculty of Economics and Business Administration, West University of Timișoara, Romania [email protected]
Abstract:
The wellness tourism is a branch of the tourism industry that is getting more and more developed. People’s
demand for well-being directly affects the demand for wellness products and services. The concept for wellness is more
and more frequently met worldwide. Still, this concept is differently understood even by people who work in this
industry. The entire concept of wellness is discussed worldwide and people try to establish a definition upon it. One of
the research methods used is the theoretical one: We analyzed the concept of wellness and synthesized the important
aspects of the concept. The other research method used is a quality method, case study: We analyzed the 4 and 5 stars
accommodation units in Romania and established the level of development of their wellness products and services.
Key words: wellness; tourism; tourism products; tourism service; management;
JEL classification: Z32
1. INTRODUCTION
The healthy lifestyle began to have an encreasinly importance for many individuals. A nice
look, a good general health and a lifestyle that includes sport represent some of the individuals’
wishes that lead to certain specific behaviours. This healthy behaviour typology can be frequently
encountered in developed societies and reflects equlibrum and personal harmony. The need of
wellbeing is becoming more and more spread and stimulates the individuals’ demand for healthy
products and for wellness products. These demands accompany the individuals in their everyday
life: at home, at work, in their free time, on holidays and so on. A mix between health, wellness and
tourism lead in a natural way to relaxation, exploration, socialisation, an ecreased self-esteem, or, in
other words, to a general state of wellbeing. All the above, and not only, have a significant
contribution to the developing of the wellness tourism.
The wellness industry has developed in the last few years all over the world. It provides
both products and services for local and international tourists. These services are provided, among
others, by spas, fitness organizations, wellness centres, holistic centers and so on.
The management of the demend for wellness products and services represent a real challange
for businessman, shareholders and managers. The industry of the wellness tourism must identify the
characteristics of these demands. The managers must adapt permanently to the fluctuations of the
clients’ demand and needs that are constantly changing. They have to adapt to he market demands
and have to come up with new and innovative wellness products and services according to the
clients’ needs. The main purpose of this article is to bring some clarifications upon the entire
concept of wellness and to establish the level to which wellness products and services are offered
by 4 and 5 stars accommodation units in Romania.
2. LITERATURE REVIEW
At a first approach the distinction and the defining of the terms “medical tourism” and
“wellness tourism” seems quite difficult. Due to this fact the organizations from the tourism
industry easily mix them. At a rudimentary level one can say that medical tourism is practiced by
people who suffer of a physical disease, whereas the wellness tourism is practiced by people who
are healthy, physically speaking. But, if we go beyond this simplistic explanation, we can easily
observe that this distinction of the two terms is not enough and that applicability is quite large.
Besides this, even these simplistic definitions may cause debates. For example, if a healthy
person travels for a preventively medical visit, what kind of tourism is involved: wellness tourism
or medical tourism? Or, if a person that suffers of arthritis or another alike disease and travels in
order to attend a meditation class in order to improve its health, what kind of tourism does he/she
practice? Another example is that of a healthy tourist that travels for a plastic surgery, that person
practices wellness tourism or medical tourism? And the examples can continue.
The members of the spa industry and of the hospitality industry are familiar with the
problem of defining these two terms. Both in terms of the spa industry and the hospitality industry,
as well as medicine and other alike fields, the clear distinction between the two terms is extremely
useful and necessary.
In terms of scientific research, the wellness tourism is frequently linked to the medical
tourism, or even to a more ambiguous concept, the health tourism. The wellness tourism is a much
more newer concept than the medical tourism. Due to this fact it is quite difficult to indicate the
exact sources that define the concept of wellness by itself. The scientific literature shows that the
definitions cover a large range, from linking almost exclusively the wellness tourism with the spa
sector to linking the wellness tourism with a variety of tourist products such as holistic healing,
spirituality, sports/fitness, ecotourism and so on.
There is no global authority that can define the two terms. Until now, the businessman, the
shareholders and different organizations launched some definitions for both the medical tourism
and wellness tourism.
The Medical Tourism Association is one of the most well-known international organizations
that represent medical tourism. From their perspective, “medical tourism is where people who live
in one country travel to another country to receive medical, dental and surgical care while at the
same time receiving equal to or greater care than they would have in their own country, and are
traveling for medical care because of affordability, better access to care or a higher level of quality
of care. Domestic Medical Tourism is where people who live in one country travel to another city,
region or state to receive medical, dental and surgical care while at the same time receiving equal to
or greater care than they would have in their own home city, and are traveling for medical care
because of affordability, better access to care or a higher level of quality of care”.
Unlike the medical tourism, for the wellness tourism there is no such an organization like the
Medical Tourism Association. Due to this fact there are no definitions available at an international
level. At a primary translation, the word “wellness” refers to the general state of wellbeing, seen as
a whole. Nevertheless, in order to understand and to define the wellness tourism, we must
understand and define the concept of wellness. “Wellness” is a relatively new concept that has been
used more frequently during the last two decades. It is assumed that the term has been introduced in
the modern era by Dr. Halbert Dunn, between the years 1950-1960. As mentioned above, there are
no key definition for this term. Below, there is presented a synthesis (table no.1) regarding the
approaches and definitions of the wellness concept over the years.
Table no. 1. Synthesis of the approaches of the wellness concept
No. Sources Approaches
1 World Health
Organization
“Health is a state that refers to the mental, physical and social well-being,
and not only to the absence of any type of disease.” (definition adopted in 1948)
2 National
Wellness Institute
(founded in 1977)
“Wellness refers to the active process that helps people become aware of,
and make choices toward a more successful existence.”
3 Mueller H.,
Kaufmann E.L.,
(2001)
“Wellness tourism sums up the relationships and phenomena that result
from a trip taken by people whose main motive is to preserve or promote their
health. They stay in a specialized hotel which provides the appropriate
professional knowhow and individual care. They require a comprehensive service
package comprising physical fitness/beauty care, healthy nutrition/diet,
relaxation/meditation and mental activity/education.”
4 Smith M.,
Kelly C. (2006)
“In order for an experience to be qualified as a contemporary wellness
tourism experience some deliberate contribution has to be made to psychological,
spiritual or emotional well-being in addition to physical. This takes wellness
tourism from the realm of being merely a passive form of tourism with a focus on
escapism to one where tourists are purposefully driven by the desire to actively
seek enhanced wellness.”
5 Jagyasi P.
(2006)
“The wellness tourism refers to the process of a traveler that seeks a
journey specifically in order to improve or promote their health and wellbeing.
The tourist will stay in a certain place where he will be offered different health-
promoting physical activities, relaxation methods and nutritious food in a
comprehensive package.”
6 Smith M.,
Puczko L. (2009)
“The tourism industry needs a segmentation of the wellness market, a
differentiation of products into several sub-segments of the wellness tourism: spa
tourism, thalasso tourism, holistic tourism, yoga and meditation tourism, spiritual
tourism.”
7 Travel to
Wellness Magazine
“Wellness is about traveling in order to achieve, promote or maintain
maximum health and a sense of well-being. A wellness journey may include spa
treatments, healthy eating, outdoor activities (hiking, cycling, mindful walking,
yoga, paddling and cross-country skiing or snowshoeing), inspirational outings
and adventures that clear or expend the mind, and educational programs that teach
us how to incorporate healthy habits into our everyday lives.”
8 Global Spa
Summit (2011)
“Wellness tourism involves people who travel to a different place to
proactively pursue activities that maintain or enhance their personal health and
wellbeing, and who are seeking unique, authentic or location-based
experiences/therapies not available at home. A wellness tourist generally seeks
integrated wellness and prevention approaches to improve their health/quality of
life.”
Source: Personal approach, 2016
From the table above can be observed how the perspective on the concept of wellness and on
the wellness tourism suffered different changes in time. The definition of health adopted by WHO
in 1948 refers to the main principles of wellness and exceeds the physical state of health (the
absence of disease) and focuses on the general state of wellbeing. According to them, the general
state of wellbeing includes both mental and social dimensions. Starting here, the up to date wellness
organizations adopted a specific management for this particular type of industry, a management
based on new, innovative and personalized products and services for specific clients opened to
innovation.
Starting from the numerous definitions of the concept of wellness, Global Spa Summit (2010)
found some common features of this concept:
Wellness is multi-dimensional;
Wellness is holistic;
Wellness constantly changes over time;
Wellness is both individual and influenced by the environment;
Wellness is a self-responsability; (Global Spa Summit, SRI International, 2010, p.18)
4. METHODOLOGY AND DATA
In Romania the wellness tourism is only starting to develop. In order to establish the
Romanian wellness tourism’s level of development, the scientific research has been done as
follows:
The research method used is a quality method – a short descriptive case study. The research
segment consists of 4 and 5 stars accommodations from Romania. The data were collected from the
database of the National Agency for Tourism (ANT) in June 2016. After collecting the data, each
accommodation unit was checked in order to find out whether it offered wellness products and
services or not. The accommodation units were checked in October-November 2016. For the ones
that offered wellness products and services, the following classification has been done:
Developed level
Medium level
Slightly developed level
The testing of each accommodation unit has been done by checking their web site or by
phone.
Finally, the information was synthesized and graphics and tables were made. The graphics
and tables are descriptive, since this is a descriptive case study. They show the number/percent of
the accommodation units that provide wellness services and at what level of development they
provide them. The graphics and tables show the level of development of the wellness tourism in
Romania among the 4 and 5 stars accommodation units.
The total number of 4 stars accommodation units from Romania is 715 (table no. 2). 456 do
not offer wellness services, 98 offer some wellness services at a lower level, 42 offer such services
at a medium level and 119 offer wellness products and services at a developed level.
Table no. 2. Level of Wellness in 4* Accommodation Units
Welness 4 * Accommodation Units
Welllness Accomodation unit %
Developed 119 16.64%
Medium 42 5.87%
Slightly developed 98 13.71%
No 456 63.78%
Total 715 100.00%
Source: Personal approach, 2016
Figure no. 1 – Level of Wellness in 4* Accommodation Units Source: Personal approach, 2016
Above (figure no.1) there is presented the percentage distribution of the 4 stars
accommodation units in Romania. 64% of them do not offer wellness services, 14% offer some
wellness services at a lower level, 6% offer such services at a medium level and 16% offer wellness
products and services at a developed level.
The total number of 5 stars accommodation units in Romania is 127 (table no.3). 24 do not
offer wellness services, 6 offer some wellness services at a lower level, 23 offer such services at a
medium level and 74 offer wellness products and services at a developed level.
Table no.3. Level of Wellness in 5* Accommodation Units
Welness 5 * Accomodation Units
Welllness Accommodation unit %
Developed 74 58.27%
Medium 23 18.11%
Slightly developed 6 4.72%
No 24 18.90%
Total 127 100.00%
Source: Personal approach, 2016
Figure no. 2 – Level of Wellness in 5* Accommodation Units Source: Personal approach, 2016
Above, (figure no. 2) it is presented the percentage distribution of 5* accommodation units in
Romania. 19% do not offer wellness services, 5% offer some wellness services at a lower level,
18% offer such services at a medium level and 58% offer wellness products and services at a
developed level.
So, it can be noticed that although in Romania the wellness tourism is only at its start, 36% of
the 4 stars accommodation units and 81% of the 5 stars accommodation units provide wellness
services at different development levels.
4. RESULTS AND DISCUSSIONS
After studying the international literature related to the wellness tourism and elaborating this
descriptive case study, the following results emerged:
As mentioned above, starting from the literature review, there has been done a subjective
classification of the 4 and 5 stars accommodation units that offer wellness services, as follows:
Developed level – the accommodation units that offer complex and diversified wellness
products and services adapted the clients’ needs (complex and personalized products and services
like holistic treatments, different types of massages, sauna, fitness, relaxation methods, meditation,
courses etc);
Medium level – accommodation units that offer some wellness products and services (offer at
least 3-4 wellness services);
Slightly developed level – accommodation units that offer only a few wellness products and
services (at least 2 such services);
The total number of 4 and 5 stars accommodation units in Romania is 842 (table no. 4). 480
do not offer wellness products and services, 104 offer some wellness services at a lower standard,
65 offer medium lever services and 193 offer wellness products and services at a developed level.
Table no. 4. Level of Wellness in Romania
Level of wellness in Romania
Welllness Accommodation
unit %
Developed 193 22.92%
Medium 65 7.72%
Slightly developed 104 12.35%
No 480 57.01%
Total 842 100.00%
Source: Personal Approach, 2016
Figure no. 3 – Level of Wellness in Romania
Source: Personal approach, 2016
Above (figure no.3), there is presented the percentage distribution of the 4 and 5 stars
accommodation units in Romania. 57% do not offer wellness services, 12% offer some wellness
services at a lower level, 8% offer such services at a medium level and 23% offer wellness products
and services at a developed level.
Overall, it can be observed that in 4 and 5 stars accommodation units in Romania, 33% offer
wellness services. This means that top managers start paying more and more attention to this field
of tourism, the wellness tourism.
5. CONCLUSIONS
In Romania the wellness tourism is only at the beginning. It can be observed from the
graphics and tables above that, at a national level, the wellness tourism is just starting to develop.
More than half of the 4 and 5 stars accommodation units do not offer wellness products and
services. Still, almost a quarter of them offer such products and services at a developed level.
This fact shows that the managers of these accommodation units have a more clear vision
upon the concept of wellness and want to develop this concept in the accommodation units they are
running. It can be also observed that the accommodation units with a higher number of stars offer
more developed wellness products and services, at a higher level.
The main difference between the accommodation units that offer common wellness services
and the ones that offer complex ones, does not depend only on the offered facilities, but rather on
the entire concept of wellness, implicitly on the management of the entire accommodation unit. An
accommodation unit that has a more clear vision upon wellness and that has identified the profile of
its customers has big chances of making the business a real success.
The organizations from the tourism industry must permanently anticipate and analyze the
market trends. Starting from these analyzes they must always come up with new products adapted
to the market demands. One of the main roles of the managers is to decide when, how and what
kind of innovation to implement.
For future research, it would be interesting to see how many of the total number of
accommodation units in Romania (not only 4 and 5 stars), offer wellness services and the level of
development they provide them. It would be also interesting to see what is the level of development
of the wellness tourism in different Regions of Romania, and not only overall.
REFERENCES
1. Cohen, Mark, Bodeker, Gerard, (2008), Understanding the Global Spa Industry: Spa
Management, Butterworth-Heinemann, Amsterdam, p.45.
2. Global Spa Summit, SRI International, (2010), Spas and the Global Wellness Market,
Research Report, p.18.
3. Global Spa Summit, (2011), Wellness Tourism and Medical Tourism: Where Do Spas
Fit?, Research Report.
4. Jagyasi, Prem, Wellness Tourism Guide, (2006); - http://drprem.com/wellness/what-
is-wellness-tourism, accessed August 8, 2016.
5. Medical Tourism Association http://www.medicaltourismassociation.com/en/medical-
tourism-faq-s.html, accessed July 25, 2016.
6. Mueller, Hansruedi, Kaufmann, Eveline, (2001), Wellness Tourism: Market analysis
of a special health tourism segment and implications for the hotel industry, Journal of
Vacation Marketing vol. 7.1, p.3.
7. National Agency for Tourism – www.ant.ro, accessed September 5, 2016.
8. National Wellness Institute http://www.nationalwellness.org/?page=Six_Dimensions,
accessed August 8, 2016.
9. Smith, Melanie, Kelly, Catherine, (2006), Wellness Tourism, Tourism Recreation
Research vol.31.1, p.2-3.
10. Smith, Melanie, Puczko, Laszlo, (2009), Health and Wellness Tourism, Elsevier,
Oxford, p.100.
11. Travel to Wellness Magazine
http://www.traveltowellness.com/abouttraveltowellness, accessed August 8, 2016.
12. Wellness Tourism Worldwide - http://www.wellnesstourismworldwide.com/top-10-
wellness-travel-trends-2014.html, accessed August 3, 2016.
13. World Health Organization – http://who.int/about/en/, accessed August 3, 2016.
Professor PhD Elena HLACIUC
'Ștefan cel Mare' University of Suceava, Romania [email protected]
Lecturer PhD Marian SOCOLIUC
'Ștefan cel Mare' University of Suceava, Romania [email protected]
PhD Geanina MĂCIUCĂ
'Ștefan cel Mare' University of Suceava, Romania [email protected]
PhD Student Rodica AILOAIE
'Ștefan cel Mare' University of Suceava, Romania [email protected]
Abstract:
Globalisation, in addition to the many effects it has in all areas, determines, in what concerns higher
education, a fierce competition between universities worldwide. This competition requires, as an essential element, that
in addition to the services offered by the universities, they also develop tools to reveal their costs. Academic and
financial performance are the two measures of the management of a university. Accounting supports the management of
a university by its three facets, which form, together, the institution's accounting information system: budget
implementation accounting, financial accounting, and management accounting.
However, while budget implementation and financial accounting are well represented in Romania, the same cannot be
said about management accounting. In this paper we shall analyse a possible application of management accounting in
Romanian universities, using the C.A.N.O.A. model, a method that is currently used in Spain.
Key words: public accounting, cost centres, activities, Romanian universities, CANOA
JEL classification: M41
1. INTRODUCTION
Given that educational services (and in this paper we shall focus on higher education
services) are a feature of the service industry (Paschia, 2016, p.4), and that the dynamics of these
services are influenced by population dynamics, on the one hand, and by the labour market, on the
other, good cost management is absolutely necessary. At the same time, the competition between
universities, both nationally and internationally, coupled with reduced funding resources, entails
changes in the management of universities.
Currently, in Romania, the public sector accounting legislation, namely the Order of the
Minister of Public Finance no. 1917/2005, provides that institutions are bound to organise and
manage their own accounting activities, their financial accounting and, as appropriate, their
management accounting, which are adapted to the specific nature of their institution. As its
application is not mandatory, currently there is no system of management accounting in the public
sector. However, we must address this as a part of the management process, as management
accounting helps determine the efficiency of the manner in which resources are used.(Tabără N.,
p.25). At European level, the implementation of this process is ongoing. Countries like Austria,
Germany, Poland, Portugal, Sweden, the UK, and Spain have already accumulated experience in
this area.
Education is one of the core systems of any society, and we believe that the implementation
of management accounting is imperative, that the decisions of the governing structures of public
bodies should be available, not only from economic and financial information, but also from budget
accounting and from technical and economic information generated by analytical accounting
(Esteban M.A.L., 2013, p.10).
This topic is currently being broached extensively in the Romanian literature, as it is
considered of great interest. Current investigations focus on which of the methods studied by the
international literature is more likely to suit the Romanian higher education system.
This paper focuses on a Spanish management accounting model, called C.A.N.O.A. -
Sistema de Contabilidad Analítica Normalizada para las Organizaciones Administrativas. The
main reason that motivated our choice of model is the similarity between the two accounting
models (Romanian and Spanish).
2. A POSSIBLE MANAGEMENT ACCOUNTING MODEL THAT COULD BE
ADAPTED TO SUIT ROMANIAN UNIVERSITIES
While higher education institutions are governed by the university autonomy principle,
their financial activity is limited in terms of attracting revenue, on the one hand, and in what
concerns the use thereof, on the other. As a result, financial information must be directed to all
stakeholders: rectors, vice-rectors, deans, vice-deans, directors, employees (Malles Fernad E., U.
Garcia Burgo, 2010, p.121). Management accounting, along with budget accounting and financial
accounting, can support them. So far, no such model has been developed in Romania, this being the
reason for our analysis of the C.A.N.O.A. model implemented in public universities from Spain,
trying to adapt it to the characteristics of Romanian universities. The C.A.N.O.A. model "is a
subsystem within the global information system, aiming to provide information for decision-
making" (Marques MCC, p.7) and works with the following components: cost items, revenue items,
cost centres, activities, internal relations, distribution and allocation criteria, and management
systems that provide information.
direct direct
indirect
Figure 1. Operation of the C.A.N.O.A. model Source: Universidad Politécnica de Madrid, 2015, Modelo de Contabilidad Analítica para Universidades Públicas, p.2
Applying the C.A.N.O.A. model (Figure 1) involves the following steps:
- Establishing cost centres/activities;
- Determining internal relations;
- Establishing distribution and allocation criteria;
- Determining costs;
- Allocating costs by cost centres/activities (directly or indirectly);
- Distributing costs (from top to bottom) starting with top-level centres/activities to bottom-
level centres/activities;
- Allocating revenue by activity;
Cost determination
Allocation
Distributio
n
Activities
Centres
Structural
relations
Global
marginal
costs
Marginal
costs, by
activities
Revenues
- Determining marginal costs, by activity;
- Determining global marginal costs.
Cost centres are structures of a university that conduct different defined activities. In the
case of a university, the cost centres are: main centres, used to conduct the core activity, related
centres, used to conduct activities that are not intrinsic to universities, auxiliary centres, and
management centres (Table 1).
Table 1. Determining the main centres in Romanian public universities
Cost centres Centre name
Main centres (finalists) Faculties (departments, centres)
Research institutes
Doctoral schools
Related centres (which conduct
activities different from the
university's own activities)
Sports centres
Cultural centres
Other centres
Auxiliary centres (which conduct
activities that support the other
centres)
Social centre and dormitories, cafeteria
Publishing house + printing office
International relations
Other centres
Management centres Rector's Office
General Administrative Directorate
Source: own research
The activities consist of a set of operations of a university, which consume resources and for
which we would like to know the associated costs (Table 2).
Table 2. Determining the main activities in Romanian public universities
Activities Activity name
Main activities (finalists) Higher education activity
Research activity
Related activities Sports activities
Cultural activities
Other activities (kindergarten, after school)
Auxiliary activities Dormitory - (social) cafeteria activity
Printing activity
Other activities
Management and administrative
activities
Management activity
Administrative activity
Source: own research
Cost items are "each of the significant categories in which are classified the consumptions
of an organisation, grouped by economic characteristics and level of information required by the
entity." (IGAE 2004, quoted by Hernandez A.L. et al, 2011, p. 47); more specifically, cost items
group and classify the goods and services used by a university in order to conduct its activities.
Cost items in management accounting and economic classification in budgetary accounting
must be interdependent. Although the literature points out several criteria for cost classification, this
paper shall focus on grouping them into direct costs and indirect costs.
Table 3. Determining types of costs
Expenses The allocation/distribution method
Personnel costs direct
Cost of goods and services direct/indirect
Costs related to social security and other costs direct
Cost of fixed assets (including depreciation) indirect
Financial costs indirect
Source: own research
Each cost is linked, directly or indirectly, to a cost centre (bottom-level or top-level) and, in
its turn, to a specific activity. Ideally, each cost has a direct correspondence to a bottom-level
centre, but there are situations when a cost is related to a higher level centre (expenses related to
utilities or depreciation), in which case we need to find ways to allocate them to the bottom-level
centres (Universidad Politécnica de Madrid, 2015, Modelo de Contabilidad Analítica para
Universidades Públicas, pp.19-24):
- number of credits for distributing the costs for the materials used in the course of the
teaching activity, laboratory activities, etc.;
- number of persons for distributing the costs for the materials used in the course of the office
teaching activity, etc.;
- number of users for the distribution of various costs for services (repairs, utilities), etc.
This paper aims to provide a general overview of this management accounting model for
public universities, and the detailed overview of cost-sharing arrangements shall be the focus of
future research.
The revenue items, in the case of Romanian universities, are identified in Law 1/2011 on
National Education:
- revenue from tuition fees, charged to students;
- revenue from scientific research;
- revenue received as core funding from the Ministry of Education and Scientific Research;
- revenue received as complementary funding from the Ministry of Education and Scientific
Research;
- revenue received from the Ministry of Education and Scientific Research as additional
funding;
- competition-based funding allocated by the Ministry of Education and Scientific Research
for institutional development;
- competition-based funding allocated by the Ministry of Education and Scientific Research
for inclusion, scholarships, and social protection for students;
- revenue from sponsorships and donations;
- revenues from other activities (related, auxiliary).
According to Figure 1, we note that this model does not allow us to associate revenue to cost
centres,
as these are associated to the activities. The revenues from tuition fees are allocated to finalist
activities, and the revenues from research activities are allocated to the cost centres to which said
activity is attributed. Competition-based core funding, complementary funding, and funding
allocated by the Ministry of Education and Scientific Research for institutional development, as
well as funding for inclusion, scholarships and social protection for students is allocated according
to the standards set by CNFIS. We shall address this topic in our upcoming articles.
CONCLUSIONS
The aim of this study was to present a management accounting model that can be easily
adapted to Romanian universities. Knowing, at a moment's notice, several key indicators such as
the cost of a Bachelor's Degree, Master's Degree or doctoral programme (as well as the total costs
involved), the degree of occupancy of each Bachelor's Degree/Master's Degree programme.
All this information contributes significantly to the management process. The study of the
implementation of such a system to the accounting of Romanian universities is in its incipient
stages. Our future research shall address cost-sharing arrangements between cost centres and
activities. It is a difficult task, as at the moment budget accounting prevails, the budget being the
only control instrument at this time. Preparing a management accounting model is a difficult
endeavour, and its implementation is even more difficult. Politics aside, the technical aspect is very
important at the moment, as adapting software to the new requirements involves high costs.
ACKNOWLEDGEMENT: We would like to thank Mr. Manuel Clavero Iglesias, Jefe del
Servicio de Contabilidad, Presupuesto y Tesoreria and Mr. Miguel A. Lopez Quian for the kindness
shown in presenting us the implementation of the C.A.N.O.A. model at the University of Santiago
de Compostela.
REFERENCES
1. Eduardo Malles Fernández, Unai Del Burgo García, Los Sistemas de Información Contable
En La Gestión Universitaria, Revista de Dirección y Administración de Empresas. Número
17, diciembre 2010, pp. 119-140;
2. Esteban M.A.L., 2013, La Contabilidad de costes en las universidades públicas españolas:
una aproximación a su estado actual de implantación con referencia especial al caso de la
Universidad de Cantabria, Universidad de Cantabria, 2013;
3. Legea nr.1/2011 privind Legea Educației naționale, publicată in Monitorul Oficial, Partea I,
nr. 18 din 10 ianuarie 2011, cu modificările ulterioare;
4. Mallo C., Rocafort A. et al., 2014, Contabilidad de direccion para toma de decisiones.
Contabilidad de gestion y de costes, Profit Editorial, Madrid, 2014;
5. Marques, M.C.C, 2010, The role of cost accounting in the university performance
measurement in Portugal, descărcat de pe adresa https://mpra.ub.uni-
muenchen.de/29749/1/MPRA_paper_29749.pdf;
6. Ministerio de Educación, 2010, Modelo de contabilidad analítica para las universidades
públicas. Particularización del Modelo CANOA para Universidades, Ministerio de
Educación, Madrid.
7. Oficina de Cooperación Universitaria, 2011, Libro Blanco de los costes en las
universidades, Comité Científi co Académico de la Oficina de Cooperación Universitaria
(OCU), Madrid.
8. OMFP 1917/2005 privind organizarea şi conducerea contabilităţii instituţiilor publice,
planul de conturi pentru instituţii publice şi instrucţiunile de aplicare a acestuia publicat
în Monitorul Oficial al Romaniei, Partea I, nr. 1.186 din 29 decembrie 2005;
9. Ortega Egea, M. T.; Rodríguez Ariza, L. Y López Pérez, M. V. , 2008, Un modelo de
cálculo de costes para el ámbito universitario: el uso del tiempo como unidad de prestación
en una unidad organizativa, Revista de Contabilidad - Spain Accounting Revue, (RC-SAR),
vol. 10, no.1; pp. 99-132 Madrid.
10. Paschia L., 2016, Implementing target costs method in romanian higher education
institutions, Hyperion Economic Journal, no.1(4), March 2016;
11. Sobanska I., Kalinowski J., 2013, Cost Management in European Universities-a Time of
Change, ISSN 1822–7260 Social Sciences, no. 4 (82), 2013;
12. Tabără N., 2006, Modernizarea contabilității și controlului de gestiune, Editura
TipoMoldova, Iași, 2006
13. Universidad Politécnica de Madrid, 2015, Modelo de Contabilidad Analítica para las
Universidades Públicas, disponibilă pe adresa de internet
http://www.upm.es/sfs/Rectorado/Vicerrectorado%20de%20Asuntos%20Economicos/Area
%20de%20Gestion%20Economica%20y%20Financiera/Contabilidad%20Analitica/INFOR
ME%20PERSONALIZACI%C3%93N%20CONTABILIDAD%20ANAL%C3%8DTICA%
2018_3_2015.pdf
Professor PhD Valeriu LUPU “Ştefan cel Mare” University of Suceava, Romania
Abstract:
The quality of a manager's decision improves based on high quality financial statements, hence the need to
find means to increase the quality of financial reporting, specifically to increase the quality of the assurance process.
The ultimate aim is to reduce the skepticism of users of financial data and to use XBRL as Internet-based technology to
enable electronic preparation and exchange of worldwide financial statements.
Key words: XBRL, insurance services, audit, financial information, business
JEL classification: M15, M49
1. INTRODUCTION IN THE FIELD
The XBRL taxonomist is a new profession with an explosive demand in the world of work. Each
company will be dedicated to train the XBRL specialists who will be: accountants, auditors,
economists and will be specialising in different taxonomies:
IFRS
US – GAAP
UK – GAAP
or taxonomies of local/national jurisdictions ( Romania, France, Belgium and others) who will track
the new versions and changes of the taxonomies , will reshape the assets and statutory reportings
according to the active standards, will know very well the standards specifications and they will be
highly paid for their cognitive synergy in financial and accounting sector.
The financial reporting taxonomist profession is not part of the IT department and also the
economists don’t want to learn a programing language. Same as an accountant is describing the
elements from a company into account books by identifying the right accounts according to the
double entry bookkeeping , same the financial reporting taxonomist will reshape the accounts of the
company applying the financial concepts that are standardised and regulated by IFRS and will
transform the financial reporting into a web document with a standardised meta-data, that will
include the reported financial concepts , balance sheets and meta-data ( the description of the data).
All companies’ web portals or institutional, banking portals of Stock Exchange and of the
government agencies will be changed into web informatic systems which will be documents
consuming / XBRL reportings, the whole Business – to- Business industry will be consuming
XBRL documents, any financial, managerial, controlling, performance reporting KPI ( Key
Performance Indicator) will apply the XBRL format.
The main objective for Romania, the Government, the Commission Securities, Stock Exchanges,
Association of Chartered Certified Accountants and Charter Institute of Internal Auditors is the
exchange of economic data with the business global sector.
At the moment, the companies are reporting the balances using the electronic signature. To
implement XBRL, the main strategies are:
To generate economic data. At this time the balance sheet of a company is financial data but
by aggregating the data of all companies listed on Stock Exchange means economic data.
To increase the number of the private and public investors by simplifying the transparence
and the quality of business data.
How is the process of collecting the balance sheets data working at the moment? Of course, it is
done manually by collecting Excel documents with the data of the companies and then in the
systems of commercial registers, of the NAFA and of different institutions using the data.
Worldwide economic and social transformations have changed the way companies think and
do business.
Any IT solution to support accounting must use the XBRL standard (Extensible Business
Reporting Language) as a novel and optimal solution for improving the accounting systems in the
Digital Economy.
XBRL is an Internet based technology that is rapidly evolving towards a standard for
financial reporting. A good manager's decision is based on high-quality financial information.
XBRL is an extensible reporting language (the eXtensible Business Reporting Language), a system
built to allow electronic preparation and exchange of worldwide financial reporting.
XBRL is a universal language of electronic business for information, reporting and analysis,
an easier, faster and more efficient means of communicating financial and accounting information.
XBRL creates a link between information technologies (XML) and accounting standards (GAAP).
Raising the quality of financial information means simplifying them, expanding their transparency,
increasing their compliance with legal regulations, and accelerating their preparation. The quality of
financial statements gains the status of an insurance service.
2. WHAT IS XBRL?
Being independent from the hardware and software platform, XBRL is able to use the
Internet for reporting, providing an ideal basis for building a standard, as a XBRL taxonomy is a
translation of GAAPs in XML documents. The work based on the XML provides the financial
community with a preparation method based on standards, publication in various formats and
proper extraction of financial statements of companies. XBRL provides software vendors,
developers and users, with specifications necessary to enhance the preparation, exchange and
comparison of information reporting, thus adding extensible semantics. This is possible by applying
the concept of taxonomy.
A XBRL taxonomy is an XML schema that defines new elements, each corresponding to a
concept found in XBRL documents. A taxonomy adds semantic value to XBRL language. The
importance of financial information is described in the taxonomy, and the value of a document
refers to the meaning of tags, where a tag is a meta-definition in a programming language, used to
identify modules, Web pages or keywords. Currently, XML has become an open data format for
using the Internet. XBRL is a client-type language based on XML, specialized in accounting and
financial reporting. Based on its results, any accounting software will be able to perform the
automation and translation of numbers and text, that can be viewed with Web browsers,
spreadsheets, expert systems, computer applications etc., and at the same time ensure the necessary
transparency. XBRL is intended to improve the product of financial statement by understanding
accounting standards and not by introducing new ones. XBRL specification is designed to
maximize the benefits of all parties who use it:
• those responsible for preparing financial information;
• intermediates in the preparation and distribution process;
• users of financial information (society as a whole);
• vendors that distribute software and services to more users.
For reporting and distributing financial accounting information in a consistent format, the
designers of this language aim at developing a unitary vocabulary, used in all documents reported
on the Internet, throughout the entire life cycle of information, starting with creating primary
documents (invoices, orders, etc.), creating other documents for the operations of collecting,
aggregating and processing financial-accounting information, and ending with legal regulations and
any other statements and reports of the company. As it is known, information is stored in the
company’s information systems in a wide variety of formats and in great detail. This aspect is
characteristic to each company, even if companies use the same software for financial and
accounting statements. This explains the inconsistencies found in the loan documentation or during
harmonization of accounting, reporting to investors and other joint activities. The problem
complicates even further, when the definition of a single information element may be altered by the
specific regulations of the country of origin. For example, the value of an asset may be defined
differently in some European countries compared to other countries, where there are other
accounting principles and practices. Such differences affect many businesses operating in
compliance with particular national jurisdictions. XBRL creates a common vocabulary for precise
financial information in all their details for inclusion in a report, taking into account the differences
in legal regulations and other regulations.
3. XBRL IN EUROPE AND WORLDWIDE
XBRL is designed as a standard language that can be used in any company to define
financial reporting documents. After being created and published on the Web, the financial situation
can be accessed for any reason by analysts, investors, publishers, software vendors, developers and
others. Of course, there may be not only the financial statements themselves, but also other types of
reports such as general ledger transactions, non-financial situations, financial and accounting
legislative acts, yearly and biannual reports of any kind. In XBRL, the annual report will contain all
elements of a financial statements (balance sheet, income and loss statement, cash flow statement,
statement of changes in equity, accounting policies and explanatory notes, the auditor's report)
encoded in XBRL. The obtained document can be either read directly by users interested in printing
the report or used on the Web for other purposes. Graphics developed based on financial data,
reports or even specific ledger accounting transactions, all encoded in XBRL, can represent
elements of the annual report. In Europe, XBRL International has worked together with the IASB
(International Accounting Standards Board) to ensure the compliance with International Financial
Reporting Standards (IFRS), in terms of coding elements in XBRL format. The program can help
managers and investors to reduce skepticism and increase the transparency of financial statements.
XBRL is supported by "The International coalition of regulators and software companies, of
corporations and of Big Four". On an international level, regulatory bodies in the UK, Australia,
China, Denmark, Germany, Japan, Korea, all implement XBRL. International financial-accounting
regulatory bodies quickly develop XBRL procedures and coding, and recently Argentina, Belgium,
France, Hong Kong, India, Ireland, Italy, New Zealand and Spain are among countries using XBRL
or have announced that they are considering using it. Many large companies use XBRL for
publishing information. In 2005, SEC adopted a rule that sets the voluntary filling in of XBRL
reports, using financial information files in the EDGAR computer system. The introduction of
XBRL encodings automates the processing of information based on software, eliminating the
intensive and expensive labor of manually entering and comparison of data. Computers can treat
"XBRL" intelligent data and can "recognize" financial information in a XBRL document, by
selecting it, analyzing it, storing it, and exchanging it with another computer; it can also
automatically present it to users in various forms. XBRL is based on a simple idea. Instead of
treating financial information as “text”, as it is printed on a standard electronic document, XBRL
enables companies to use common “financial labels”, for identifying concepts regarding individual
reports, present in company reports, capturing the semantics encoded in standards such as GAAP or
IFRS. XBRL significantly increases the peed of financial data management, reduces the possibility
of error and enables the automatic checking of information. Companies can use XBRL to reduce
costs and time for collecting and processing data for financial reports. Users of financial data,
analysts, or financial investors can receive, compare and use data more quickly and efficiently,
thanks to XBRL. Although in 2002, the SEC took the view that regarding companies using XBRL,
it is premature to discuss and make concrete suggestions about "insurance", the question of whether
each auditor should review each XBRL coding was raised.
The insurance provided by XBRL to financial statements is a very discussed issue, regarded
as a potential field of developing scientific research conducted by audit specialists, academics and
practitioners. Today, XBRL data - obtained through SEC, the interactive data voluntary
programmed – do not require additional independent assurance, and the guidelines for completing
the information required by XBRL refer to auditing information and recommends testing, if the
financial elements are properly labeled. "Risk control" for XBRL commitments refers more to the
process of labeling financial information than to the internal control over the accounting process. Of
course, we discussed the assurance through XBRL issue, which may be provided at the level of data
input, which could mean adding the date and the nature of he assurance provided by the auditor
through a possible digital signature, together with other system information, as it has been recently
proposed, starting from the need to clarify the subject of XBRL insurance. There is also the
problem of identifying technical issues and establishing "of what could constitute an error."
Academics in the field of audit can give potential solutions to the technical problems associated
with providing insurance through XBRL. For example, due to the nature and character of XBRL,
automation, as part of the insurance process, will increase both the efficiency and effectiveness of
these insurance commitments. Technological developments prove potential in this area, such as the
Financial Reporting and Auditing Agent with Net Knowledge (FRAANK), which originated in
academic research. The continuous development of XBRL is a certainty, and represents a
technological advantage that can be used in ensuring its facilitation. XBRL based technologies can
be used for other auditing procedures, for example in the area of fraud and risk assessment or in
comparing very specific industrial data. SEC proves "slow" in promoting XBRL and showed that
members of the Financial Accounting Standards Board (FASB) traveled to SEC headquarters to
discuss issues related to XBRL. In May 2008, SEC proposed using eXtensible Business Reporting
Language for publishing financial information, starting with 2009 for large companies and 2011 for
public companies. This announcement follows a series of decisions taken by worldwide regulatory
bodies and financial services organizations aiming for the global standardization of financial
statements. XBRL has been adopted by the large Federal Deposit Insurance Corporate (FDIC),
which mandated the use of XBRL for 8,200 US banks; Shanghai Stock Exchange has adopted
XBRL for Chinese public companies, and banking companies in Spain, Belgium, Japan follow this
example; also, the European Committee for Banking Supervision discuss the global implementation
of federal and government reports. XBRL is free and becomes a means of standard electronic
communication of financial information, via the Internet, and it is implemented by a number of
large companies, organizations and government agencies. James Gunn, Deputy Director of the
Committee for Auditing and Assurance Standards has repeatedly stated that XBRL brings
opportunities and challenges in increasing the quality of financial statements.
4. OPERATIONAL VECTORS FOR XBRL
For the optimal resolution of this objective, we will separate this issue into five operational
vectors:
Digital Economy
Integration of accounting systems (SCM-ERP-CRM)
Improving the integrated accounting systems
Directions of improving the integrated accounting systems
Choosing the method and way to achieve an integrated accounting information system for
financial reporting and control of virtual organization performances.
The development of an integrated accounting system for financial reporting and
performance control of organizations will perform the following functions:
- The analysis and use of the newest and most competitive system for financial reporting, the
XBRL system for providing US, GAAP and IFRS specific reports and indicators.
- The system's capability to provide and process all accounting and financial indicators and
financial-accounting reports regarding Financial accounting, Managerial accounting, and
also reports plus US GAAP IFRS specific indicators; the main financial reports are taken
into consideration (Balance Sheet, Income Statement, Shareholder’s Equity, Cash Flow and
Disclosures).
- Creating a safe and operational interface between US GAAP standards and / or IFRS
information system.
- The orientation of the computer system specifications towards the organization's
management system, its information system, third parties and fiscal bodies; in this way, the
fiscal policies and requirements are abided by, as they become the priority of an computer
system;
- The approach of using the XBRL standard, while developing an management computer
application used for checking and enhancing the XBRL possibilities in the area of financial
reports.
As previously mentioned, XBRL is a language that can be extended at an international level,
open for use on the Internet, created by XBRL International, a consortium of more than 400
members worldwide, representing public and private companies, government agencies and
regulatory agencies, for publishing, exchanging and analyzing the reported financial data. XBRL
simplifies the preparation and publication of financial documents. The idea is to collect data only
once and convert them into multiple formats, through automatic processing. Since Romania has
joined the European Union, it is mandatory to adopt a common language for economic and financial
reporting, that is XBRL. Financial statements, Balance Sheet and Profit and Loss account have to
be aligned with the world standard. Thus, each country has its own taxonomy, in accordance with
international standards.
The adoption of XBRL in Romania would significantly reduce the costs involved in
collecting and validating information from reports, as well as their conversion, dissemination and
exchange; some of the main beneficiaries would be the following: the Government; Ministry of
Finance; Agencies and intermediary bodies for managing European funds; Body of Experts and
Licensed Accountants of Romania; local financial administrations; financial banking system;
commercial companies; national and international investors.
5. CONCLUSIONS
The benefits and opportunities that may arise from using XBRL (Extensible Business
Reporting Language) as a tool can be described; furthermore, we suggest that the use of XBRL can
be extended towards the legislation regarding accounting reporting on a national level. Companies
can use XBRL to reduce costs and processing time, to collect, and process data for financial reports.
The users of financial data can receive, compare and use data more quickly and efficiently.
Moreover, the speed of financial data management increases significantly, thus reducing the
possibility of error and enabling the automatic verification of information. In terms of insurance
services, due to the nature character of XBRL, automation, as part of the insurance process, will
increase both the efficiency and effectiveness of these insurance commitments. In order to
implement XBRL in Romania, taxonomies must be created, respectively concepts to be defined in
terms of their meanings and relations among them relating to data to be reported; moreover,
infrastructure must be created in order to enable the processing of XBRL information (collection,
validation, exchange). At the same time, software programs enabling the generation of financial
reports should be adapted to this new extensible language, abiding by the accounting standards in
force.
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Harvard Business Review
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insights-a-viewpoint.html
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began.html
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Assistant Professor of Finance R. Malar MOZHI
New Generation University College, Ethiopia [email protected]; [email protected]
Professor PhD Alexandru-Mircea NEDELEA
Stefan cel Mare University of Suceava, Romania [email protected]
Abstract:
The paper presents aspects of financial stability of Romania and effective functioning of financial sector in
Romania. Romania is one of the post- Communist countries achieving tremendous growth and development despite
problems of European economies. Financial sector is one of the several factors that has played important role for the
growth and development of Romania. The regulatory authorities of financial sector will reveal features of the emerging
financial sector of Romania.
Key words: Financial Institutions; Financial Intimidation; Financial Market; Financial Sectors; and Financial
Service.
JEL classification: G21, G22, G23, G28
1. INTRODUCTION
The impact of BREXIT (Britain Exit from Europe Union) on Romania is yet to be assessed
but the impact of high risk is not ruled out. Romania has initiated several measures to financial
stability. The growth of financial sector has to be assured. In the absence of sound and robust
financial sector the economic challenges and other international crisis would destabilize economy.
The global economic challenges associated with cross broader tensions would always attempt to
weaken financial stability in additions to internal issues. The policies of European Union and the
practices international financial institutions would influence directly and indirectly the internal
economic wisdom of Romania. Romania is one of emerging economies of European Union.
2. SCOPE OF FINANCIAL SECTOR IN ROMANIA
There are several roles and responsibilities of finance sector in Romania. The most
important features are mentioned below:
1. Achieving financial stability for economic development of Romania.
2. Developing the Financial Sector to rescue Romanian economy.
3. Rationalizing the foreign currency lending to address the vulnerabilities.
4. Improving the bank’s sources of funding.
5. Developing and fostering the non-banking financial institutions with banking financial
institutions like Capital Markets, Insurance, and Pension Schemes.
6. Promoting financial vigilance of anti-corruption and anti- money laundering.
7. Empowering regulatory authorities of financial sector.
8. Establishing sound legal framework of financial sectors with appropriate laws, regulations and
guidelines.
9. Making financial sectors sensitive to national and international financial policies, monetary and
fiscal policies of Romania and international institutions (European Commission (2015);
International Monetary Fund (2003): International Monetary Fund ( 2010); Mugur Isărescu
(2016).
3. FINANCIAL SECTOR IN ROMANIA
The financial sector is playing an important in the development of Romania. Romania has
taken several measures to improve the financial sector. It has mandate to join Europe Union in
January 1, 2007. The most important aspect is to achieve financial stability and the NBR has
decided for it in preference to price stability.
There are regulatory authorities. Now the NBR is assisting other nations to improve their
financial sectors. Romania improves its finance sector with all the problems.
Romania requested for Financial System Stability Assessment and accordingly a joint team
of IMF and World Bank conducted carried out an assessment of the Romanian financial sector in
2003. It submitted its report on September 22, 2003 with the following observations:
1. Romania has made efforts to strengthen regulatory framework of financial law and regulations
for EU accession in January 1, 2007. The Statute of the National Bank of Romania (NBR) and the
Banking Act provide the institutional framework for effective regulation and supervision of credit
institutions in Romania. There are other laws for inspection and other key functions. However
there are certain issues, in addition to other major framework, which need to be addressed such as
consolidated supervision, interest rate risk, country and transfer risks, investments and market risk.
2. Even though the banking supervision is meeting most of the requirements of Basel Core
Principles there is a need for improving consolidated reporting and supervision.
3. It is equally important for Romania to strengthen market and country risk management.
4. There is the risk of higher Non-Performance Loans.
5. There are difficulties to achieve economic recovery and financial intimidation.
6. There is a need to build the credibility and confidence of individual banks, the banking system,
insurance, pension schemes and capital market as these are the major institutions of Romanian
financial sector.
7. It is pointed for the improvements in judicial system, corporate governance, accounting and
auditing and banks.
8. The privatization is still a major task.
9. The National Bank of Romania does not have adequate powers to review major acquisitions or
investments by banks. Similarly NBR does not consult home supervisors before granting approvals
on the acquisition of Romanian bank by foreign credit institutions.
10. Romania has drawn success in curbing money laundering and it has joined the Council of
Europe’s anti-money laundering (MONEYVAL/PC-R-EV) Committee.
11. Romania has adapted several conventions on combating the financial terrorism.
12. Romania has to formulate guidelines and other relevant compliance procedures in non-bank
financial sectors particularly insurance and securities sectors.
13. It is recommended to Improve monitoring and detection of physical transportation of cash at
cross border crossings.
14. The NBR is implementing transparency practices in respect of roles, responsibilities and
objectives on supervision and it must continue to improve.
15. In respect of the Deposit Guarantee Fund (GDF) there are recommendations of transparency
and improvements in the areas of officials to disclose their private holdings, annual financial
statements in the Annual Reports,
16. The National Securities Commission (CNVM), Bucharest Stock Exchange (BSE) and
RASDAQ Stock Exchange are the main players of Capital Markets in Romania and there is a need
for strengthening the Capital Market (International Monetary Fund (2003).
The Financial System Stability Assessment of IMF has found that Romania has
implemented many of the recommendations of 2003 of FSAP of IMF but the banking system leads
the financial sector. It puts more stress on the financial sector when there is crisis in banking
system on account of rapid deterioration of economic conditions and the depreciations of leu. It
may lead to undercapitalization of banks. There should be a well-established cross-sectoral
cooperation and coordination in supervision of financial groups (International Monetary Fund
(2010).
The National Bank of Romania has splendid achievement in maintaining capital buffers 4
with 27.1% in September, 2014 and it has increased from 10% in 2007 despite of deterioration in
asset quality. The Non-Performance Loan increased to 22.65 in March 2014 from 2.8% in
December, 2008 and it has affected the credit supply. However the corporate insolvencies declined
to 35,700 in 2014 from 38,300 in 2013. The NBR has however successfully tackled it by the loan-
loss provisioning policy. There is continuous declining in credit to households and corporate
sectors. The loans to SMEs and corporate sector declined to by 5.2 5 in 2013 and 4 in August,
2014 due to both demand and supply factors such as financing capacity, collateral requirements
and lending practices. The households’ ratio of credit declined to 68.4% in 2014 from 76.4% in
December 2011. The NBR has remarkably achieved in capitalization of banking system with
foreign parent banks which have provided additional capital support of Euro 1.87 billion from
2009 to 2014 December, to their Romanian affiliates (European Commission (2015).
4. IMF ON FINANCIAL SECTOR OF ROMANIA
It is accepted universally that the IMF with its leadership has played an important role in
euro-areas crisis (Nicolas Véron (2016). During the euro-area crisis, the financial sector issues
dominantly played crucial role. The systemic risks affected the Banking Sector of EU in 2007-
2008 financial crisis. However it took long time for IMF to recognize it (Minutes of the IMF
Executive Board Meeting (2008). It was discovered that the ‘undercapitalization, funding asset
quality and sovereign risk ‘were the causes (Nicolas Véron (2016). The IMF has accepted it
(International Monetary Fund (2009). Realizing the importance of financial sector Romania made
several efforts to achieve the financial stability. One of the efforts is to request IMF and
accordingly, the IMF has made several recommendations on many areas of financial sector of
Romania through Financial System Stability Assessment on Romania. I have considered here only
main areas of recommendations on the Financial Sector of Romania. The main areas are Capital
Markets, Insurance, and Pension Schemes which are emerging non-banking and Banking
institutions of financial sector of Romania.
4.1. Capital Markets
There are three recommendations on Capital markets. The first recommendation is to
strengthen capital markets of Romania through disclosure, transparency, and integrity and to
enhance powers of the Securities Commission for effective enforcement. The second
recommendation is on stock exchange to rationalize listing and delisting of companies. The third
recommendation is on the functioning of Financial Investment Funds (International Monetary
Fund (2010). Security markets in Romania are very small and less active. As per the report to IMF
in 2008 the equity market capitalization has increased to Euro 24.6 billion in 2008 from Euro 3.0
billion. The top ten stocks account for 90% of market capitalization and it indicates slow growth of
capital markets. Equally the Corporate Bond market is small. Even though the derivatives markets
achieved relatively good growth of Euro 3.5 billion in 2007 from Euro 51 million in 2003 it
declined to Euro 1.8 billion in 2008.
4.2. Insurance and Pension
The insurance and pension sectors are very small. It is recommended to improve the
Insurance Supervisory Commission. It is suggested to have major insurance reforms of promoting
long term pension fund portfolio management and establishing sound organizational structure of
pension fund management.
4.3. Banking
The National Bank of Romania aims to achieve financial stability and managing the
systemic risks by allocating resources of economy. Mr. Mugur Isărescu has stated on the role of
National Bank of Romania on achieving financial stability of Romania (Mugur Isărescu, 2006).
The total assets of financial intermediation institutions declined below EU by 53% of GDP in
2005. The National Bank of Romania after the fall of communism it has to swiftly from a mono-
bank system to two tier system. Previously it was the centralized banking and now it has
commercial banking operations and central banking operations. It has created tremendous pressure
on the reform of central banking governance.
The main recommendation is pertaining to credit information and credit assessment.
National Bank of Romania published Financial Stability Report in December 2016 explaining the
risks to financial stability. One of the high systemic risks is on the risk of abrupt investor sentiment
due to uncertainties of global economic growth and geopolitical tensions. The institutional
financial system may affect financial stability of Romania. If there is sudden change in capital
inflows as Romania’s external borrowing is less it will not affect the financial stability. The second
factor that it will not affect the financial stability of Romania on improving the performance of
production sectors. Thus the risk of capital outflows can be neutralized by managing international
reserves and macroeconomic policy. Another high systemic risk is relating to the legislative
framework on the banking sector solvency. The Constitutional Court has declared unconstitutional
of the Law No 77/2016 with reference to the provisions of converting CHF-denominated loans into
leu-denominated loans. In respect of debt discharge the Constitutional Court has permitted on
exceptional cases. The total capital ratio is 18.8% which signifies a healthy banking sector of
Romania. The Non-Performing Loan has also declined by 3.5% which is above EU average.
Therefore the Romanian banking sector is stronger to meet any challenges of future (Financial
Stability Report (2016).
5. FUNCTIONS OF REGULATORY AUTHORITIES OF FINANCIAL SECTOR IN
ROMANIA
The National Committee for Financial Stability came into force in 2007 to prevent, appraise
and manage issues of systemic impacts. It includes the Governor, National Bank of Romania, the
President, Financial Supervisory Authority and the Chairman, Bank Deposit Guarantee Fund. In
2004, the National Bank of Romania created Financial Stability Department to achieve financial
stability and it has started functioning earlier to the global economic and financial crisis. There
were two issues such as price stability and financial stability. These two issues were debated and
finally decided in favour of financial stability. One of the Deputy Governors of the National Bank
of Romania is to achieve financial stability. The National Bank of Romania and Financial
Supervisory Authority (FSA) are two other authorities to supervise banks and non-banking
financial institutions and to supervise other financial markets respectively. The Government has
promoted the National Committee for Macroprudential Oversight and there is a decision-making
body. The Decision-making body has nine members of which there are five from National Bank
of Romania ( Governor, First –Deputy Governor, two Deputy Governors and Chief Economist);
two members are from Financial Supervisory Authority consisting the President and the First-Vice
president; and other two members are Government representatives appointed by the Prime
Minister (Mugur Isărescu (2006).
6. GROWTH AND DEVELOPMENT OF ROMANIA
The economic growth of Romania is consistent in 2015 and 2016. There is excellent growth
in domestic consumption in 2015 by Euro 7.4 billion and it has already achieved in 2016 H1 by
Euro 4.5 billion. The balance of trade is Euro 1.3 billion which is 10 times lower than
2007(Financial Stability Report (December, 2016). Romanian has achieved high human
development with 52nd position out of 188 countries. (Human Development Report 2015) The
HDI value of Romania has increased to 0.793 from 0.703 from 1990 to 2014 with an annual
increase of 0.5%. The life expectancy has increased by 5.0 years for the period from 1990 to 2014
( Human Development Report 2015). The International Monetary Fund (IMF) has announced that
Romania has achieved highest growth rate of 5% in Europe and it has improved from the forecast
of 4.2% in April 2016 (IMF: World Economic Outlook October 2016). However it has warned
Romania that the growth may slow down to 3.8% in 2017 and further it will go down to 3.3% in
2018. The overall growth rate of European nations is 2% and emerging economies will record
3.3% growth rate .The forecast of IMF on the Consumer Price Index of Romania will be positive
of 1.7% increase in 2017 and further would increase to 2% in 2018. The unemployment rate has
reduced to 6.4% in 206 from 6.8% in 2015. It is expected to reduce to 6.2% in 2017. The World
Bank has estimated 5.1% growth in 2016 (World Bank (2016). In early November the European
Commission revised economic growth rate of Romania is 5.2 %.( AGEPRESS, 2016).
7. CONCLUSION
The first important decision is the preference of financial stability to credit stability.
Consistent harping on the financial stability has yielded results. The second decision is to avail the
expertise advice of the IMF on Financial Stability and it has helped them to organize financial
sector immensely. The third most important decision is to access to European Union on January 1,
2007 and it has created urgency for implementation of recommendations of 2003 of FSAP of IMF.
In the newly opened markets of emerging Europe the large banks and insurance companies have
established their presence unlike Insurance in Romania. More efforts are required in this direction.
Recently created Banking Union of Europe Union may lend a helping hand in strengthening
Romania. The main functions of the Banking Union are : ‘Firstly, a single rulebook for banks;
secondly, a single framework for banking supervision; thirdly, a single mechanism for resolving
banks, funded by levies on the sector itself; fourthly, a common backstop in case temporary fiscal
support is needed and fifthly, a common system for deposit protection’ (.Vítor Constâncio (2013).
Romania has to formulate its legal framework to meet the needs of functions of Banking Union. In
addition to it, the financial regulations need to be strengthened. The Europe Union has the
expertise of framing and implementing them. Thus taking the assistance of the team from the
Banking Union is essential. Normally the national government implements the financial
regulations as in the case of Romania. The European Union has helped Romania to implement
financial regulations through the European Central Bank (ECB), the Committee of European
Banking Supervisors (CEBS) and the Committee of European Securities Regulators (CESR),
(Walter W. Eubank (2010). Europe has experienced difficulty in maintaining financial stability
during the euro area crisis (Ajai Chopra (2011). Never the less Romania was able to sustain its
financial stability reasonably well during this period. Thus Romania has to explore all the options
available. Romania has the lowest assets of financial sector to GDP by 75.6 % in 2015 comparing
to EU 28 in terms of assets of financial sector to GDP which stood at 284.6 % in 2015 ( Financial
Stability Report, April 2016). The financial sector of Romania lacks far behind to other EU nations
and therefore more concerted efforts are imminent. Above all there has to be effective judicial
system in Romania. There are genuine problems to Romania due to change of political system
from communist regime to democratic state. Presently it has established Constitutional Court of
Romania in 1992 and it has introduced the principles of transparency, independence, and
credibility with competent Courts and Judges. The World Bank has allotted Euro 110 million for
establishing a strong Judicial System in Romania (World Bank (2016). The project is twelve years
(2005 to March, 2017). The faith in judiciary has increased from 22% in 2005 to 44% in 2014. The
people have recognized the importance of rule of law, separation of powers and independence of
judiciary. Anti-Corruption machinery has punished former Prime minister, Ministers, Public
Prosecutors and Judges (Judge Cristi Danilet, 2014). Reform of Judiciary has already shown
results. European Union has initiated judicial reforms and accordingly Romania has adopted
strategy. The Strategy of judicial reforms could not be fulfilled in the first phase of 2003-2005 but
eventually it got extended to 2005-2007. It demands a total transformation of judicial power. The
documentations can be prepared but it is equally important to be accepted and implemented. The
principles of Rule of Law are accepted and practiced. People must recognize it. Institutional
changes are important for successful judicial system. The judges are selected and appointed and
they have to be regularly trained. Courts and training institutions need to be created adequately..
REFERENCES
1. AGEPRESS (2016), Romanian National News Agency, 22nd November 2016
2. Ajai Chopra (2011) Deputy Director, European Department, International Monetary Fund ,
Kenmare: “a systemic dimension” threatening the stability of the entire euro area” as it is
evident in’ Greece’. , “Strengthening the Financial Stability Framework of the EU”
Address: Dublin Economic Workshop – Kenmare Conference ,October 15, 2011
3. European commission (2015) Country Report Romania 2015, Brussels, 26.2.2015, SWD
(2015) 42 final
4. Financial stability Report, December (2016), Year 1, No 2, National Bank of Romania, 2016
5. Human Development Report 2015, UNDP, UNO
6. Judge Cristi Danilet (2014), Romanian Judicial Council, The Accession Process and Anti-
Corruption Challenges of Romania, 14, November, 2014,
http://seldi.net/fileadmin/public/Events/2014.11.13_SELDI_Tirana_DAY2/Tirana_Romania
_Danilet.pdf
7. IMF: World Economic Outlook October 2016
8. International Monetary Fund (2010), Romania: Financial Sector Stability Assessment
9. International Monetary Fund (2003), Country Report No.10/47
10. International Monetary Fund (2003), Romania: Financial System Stability Assessment;
11. International Monetary Fund (2009): “the financial sector remains key to the shape and the
robustness of the economic recovery,” Article IV Consultation with the Euro Area’, 30
July 2009
12. International Monetary Fund (2010), Annexure II, IMF Country Report No.10/47, February
2010
13. International Monetary Fund (2010), Country Report No. 10/47, February 2010,
14. Minutes of the IMF Executive Board Meeting (2008): “…the area’s financial system
remains sound” but it missed the ‘subsequent recession’: Euro Area – Euro Area Policies’,
25 July 2008
15. Mugur Isărescu (2016), “Central Bank and Supervisory Governance” Conference, Recent
developments in central bank governance, Amsterdam, 12 February ,2016.
16. Mugur Isărescu(2006), Governor of National Bank of Romania said:“In accordance with its
statute, the National Bank of Romania exercises several tasks regarding financial stability,
via prudential supervision over banks, monitoring payment systems, ensuring immediate
liquidity and acting as a lender of last resort, in exceptional circumstances, for credit
institutions” Foreword, Financial Stability Report, 2006
17. Nicolas Véron (2016) : “the IMF’s heft, and the leadership qualities and problem-solving
focus of its financial experts, were acknowledged as having helped to build consensus
within the troika and programme ownership within national authorities”, The International
Monetary Fund’s role in the euro-area crisis: financial sector aspects, Policy Contribution |
Issue n˚13 | 2016
18. Walter W. Eubank (2010), The European Union’s Response to the 2007-2009 Financial
Crisis, Congressional Research Service, August 13, 2010
19. World Bank (2016), Europe and Central Asia Update, World Bank, 22nd November 2016
20. World Bank (2016), Romania Judicial Reform Project, November, 30, 2016
Assoc. Prof. PhD Roman GRESHKO
Yuriy Fedkovych Chernivtsi National University, Ukraine [email protected]
Assoc. Prof. PhD Violetta KHARABARA
Yuriy Fedkovych Chernivtsi National University, Ukraine [email protected]
Abstract:
The paper reviews major stages of establishment and development of financial management, main conceptual
theories, and methods, approaches, developed by academic economists in the field of corporate finance that became the
basis for the development of financial management as a science. In the paper, the authors identify the major five stages
of its establishment, in the process of which the range of thoroughly studied issues was constantly expanded, the
methodologies of their research were enriched. The paper describes the main scientific works of famous economists of
the relevant periods that have made a significant contribution to the formation and development of financial
management as a science. The authors drew the conclusions about prerequisites to the development of financial science
and research priorities in the financial management of enterprises.
Key words: financial management, financial resources, enterprises, corporate finance, securities, financial
intermediaries, financial markets.
JEL classification: G30
1. INTRODUCTION
Financial management as a separate science originated in the developed countries at the turn
of the 19th and 20th centuries with the development of financial and commodity markets and with
the emergence of the need for a more detailed justification of financial transactions by economic
calculations. As an independent branch of science on the financial administration of an economic
entity, the financial management was formed at the junction of three important scientific areas:
general management theory, classical theory of finance and accounting. Specifically, by virtue of
the development of entrepreneurship, the emergence of corporate ownership, the institutions of
financial intermediaries, the development of financial markets and the intensification of integration
and globalization processes around the world, a specialized branch of knowledge has been
established and called ‘Financial Management’. For better insight into the significance of financial
management in the development of national economies, the importance of applying the basic
conceptual and methodological foundations and theories, it is relevant to study the evolution of the
establishment and development of financial management as a science.
2. ANALYSIS OF THE LATTER RESEARCH AND PUBLICATION
In foreign literature on corporate finance, the issues of the development of basic conceptual
foundations of financial management have been the subject of researchers and experts, namely: J.
Williams, J. Richard Hicks, H. Markowitz, F. Modigliani, M. Miller, M. Gordon, W. Sharpe, G.
Donaldson, S. Myers, M. Scholes et al. The theoretical, methodological and practical issues in the
post-Soviet space are covered in the works of such renowned academic scientists as I. Blank, A.
Vasilik, V. Kovalev, A. Podpayogin, V. Savchuk, A. Stoyanova, V. Sutormina, A. Tereshchenko,
V. Sheludko et al. They contributed to the development of financial management as a science,
however, the modern financial theory and practice confirm that the problems of analysis and
systematization of approaches to the major stages of the establishment and development of financial
management, and study if the basic theories of its development are relevant.
3. STATEMENT OF BASIC MATERIAL
The history of the development of finance went back more than for a century. Generally, the
financial science has arisen in practice. Hundreds of years, the countries tried to solve various
financial problems. The issue of finance can be found in the thoughts of such famous scientists as
Xenophon and Aristotle. Therefore, Xenophon proposed to use leasing of state property and
captives, as well as duties and fees as sources of government receipts. The trade operations,
supported by local banks, were the main source of revenues of the Rhodes state during the
development of the islands of Greece in the 4th century. In the Middle Ages, general considerations
arose regarding financial morality, found in various theological, philosophical, political and legal
works of the scholastics [1].
In general, the financiers (financial managers) early enough took a leading role in the
government. It can be explained by the fact that their activity was associated largely with fiscal
function and search for various sources of revenue for the state budget. However, the basic theories
of financial management of enterprises became the subject of scientific research much later.
For more than a hundred years of its existence, the financial management has passed a
number of stages, in the process of which the range of thoroughly studied issues was constantly
expanded, the methodologies of their research were enriched. Depending on the subject and basic
financial management priorities, several stages of the establishment and development of financial
management can be distinguished (Table 1).
Table 1. The Stages of Establishment and Development of Financial Management Development
Stages
Prerequisites to the Development Research Priorities in the Financial
Management of Enterprises
1st stage
1860s
necessity to store public revenue
in the treasuries of states;
accounting and administration of
the state-owned sector of the
economy.
- systematic approach to the description of
financial science;
- formation of knowledge, skills, and
methods of public finance management;
- foundations of the classical theory of
finance.
2nd stage
1990s
- rapid development of the
commodity market;
- necessity to mobilize financial
resources;
- necessity to apply various
financial methods and tools.
- legal and financial mechanisms for
association and merger of various
enterprises;
- establishment of new firms;
- issuance of various securities in order to
attract additional money and capital
growth.
3rd stage
1930s
- exacerbation of the economic
crisis of that years;
- necessity to identify mechanisms
of financial recovery and
elimination of negative trends at
the enterprises.
- fundamentals of crisis management of
finance;
- development of methods for bankruptcy
forecasting;
- techniques of managing cash flows;
- assessment of assets liquidity.
4th stage
from 1950 to1980
- necessity for efficient formation
and utilization of financial
resources of the leading
companies.
- budgeting framework;
- portfolio theory;
- asset valuation models;
- capital structure theory;
- dividend policy.
5th stage
from 1980 to the
present day
- brisk growth of the national
economies;
- enlarged application of new
financial instruments;
- globalisation patterns.
- active development of the financial
management;
- conceptualisation of the value-based
management;
- designation of organization models;
- integral indicators of performance.
The first stage in the establishment and development of financial management (the 1760s) is
characterized by the formation of a systematic approach to the description of financial science.
During this period, the necessity to store public revenue in the treasuries of states, as well as the
further accounting and administration of the state-owned sector of the economy, were designing the
development of knowledge, skills, and methods for managing public finance. Thus, in the middle of
the 18th century, the finance as a science emerged into an independent branch of so-called cameral
sciences. Cameralistics (from Latin camera – the palace treasury or the state treasury as a place for
storage of public revenue), developed in Germany in the 17th-18th centuries, represented a report of
administrative and economic knowledge on the conduct of cameral or palace, and, in a broad sense,
state economy. In those years, the term ‘finance’ was univocally treated as state funds, received in
the form of money, materials, services. The founders of the new scientific school are considered
German scholars Johannes Justi (1720-1771) and Joseph Sonnenfels (1732-1817), in their
monographs that came out in the mid-1760s, for the first time they gave a systematic description of
the financial science. Later, the body of knowledge, skills, and methods of public finance
management and public unions came to be called the classical theory of finance.
The second stage of the establishment and development of financial management occurred
in the 1890s and lasted until the early 1930s. The rapid development of the commodity market, the
necessity to mobilize financial resources and apply various financial methods and tools resulted in
the activities of enterprises led to in-depth study of issues in the financial management. During this
period, the accounting, economic and financial areas of management separated; the search and
assessment of funding sources for enterprises and the potential growth of financial resources in the
process of business expansion through the external sources such as issuing securities, forming
organizational and economic bases for enterprises’ association, appeared as key financial problems.
The development of legal and financial mechanisms for corporate restructuring, the
establishment of new firms, the issuance of various securities, aimed at the attraction of additional
money and capital growth became the key research findings in the corporate finance management.
As a result, the first large-scale wave of mergers and acquisitions took place during this period, the
first financial and industrial groups and associations appeared.
The third stage of financial management development (1930-1950) determined the
formation of an independent financial function in the management of an enterprise. The global
economic crisis of the 1930s, which led to the bankruptcy of some companies and the emergence of
a large number of successful investment opportunities for the others, identified, on the one hand, the
necessity to find effective financial mechanisms for recovery and elimination of negative trends at
enterprises, on the other hand, resulted in the of methods and techniques of analysis and evaluation
of companies’ investment attractiveness.
Therefore, in 1938 the American economist John Williams (1900–1989) in his famous
scientific work ‘The Theory of Investment Value’ proposed a formula for determining the intrinsic
value of a share.
He developed his approach on the dividend income by applying the discount method and
proceeded from the fact that the internal price of the share is equal to the present (or discounted)
value of all future dividends. He also believed that the quantitative assessment of the value of equity
rights plays a key role in the analysis of investment projects and selection of alternative financing
options.
In 1939, British economist John Richard Hicks (1904-1989), 1972 Nobel Laureate in
Economics, published his famous work ‘Value and Capital: An Inquiry into some Fundamental
Principles of Economic Theory’. In his writing, the author developed the concept of time value of
money by applying the techniques elaborated by him, such as comparative statistics and dynamic
analysis. At large, its concept is premised on the considerations of the price of capital, risk, and
inflation [3].
In general, during this period, the research findings in the financial management included
also the development of the fundamentals of crisis management of corporate finance, methods for
bankruptcy forecasting, techniques of managing cash flows, liquidity management, as well as
problems of financial analysis, financial planning, budgeting and financial modeling, based on
accounting.
The fourth period (1950-1980) marked the emergence of financial management as a science
and a full-fledged branch of financial science. The majority of national economies became engaged
in the processes of their integration into the world economic space, accompanied by the scientific-
and-technological advance and the necessity to attract significant investments and their evaluation.
A new group of mercenary financial managers began to appear, which could deal with financial
activities in stock markets, design investment portfolios and gradually the owners of companies
began to withdraw from operational management of enterprises. In turn, the investment theory
received a new round of development in science. A majority of the scientists, who explored the
conceptual and methodological foundations of financial management during this period, became the
Nobel Prize laureates in the future. Their developments dealt with the following areas of financial
management development:
fair value measurements (investment attractiveness) of various types of financial
instruments;
investment portfolio theories;
capital structure theories;
asset valuation models;
budgeting framework;
benefits management and dividend policy.
We turn our attention to the main scientific works of famous economists of the relevant
periods that have made a significant contribution to the establishment and development of financial
management as a science.
The American economist Harry Markowitz (born in 1927, 1990 Nobel Laureate in
Economics) in the work ‘Portfolio Selection’ (1952) described and proved the theory ‘Optimal
Portfolio of Risky Assets’ [4]. The basis of this theory is the concept of income and risk. The author
first proposed indicators to measure the risk of securities, because before it was estimated intuitively.
The paper also postulates that in order to minimize the risk the investors should combine risky assets
in the portfolio, and the level of risk for each type of asset should not be measured separately, but its
impact on the overall risk level of a diversified portfolio of investments should be taken into account.
The scientist’s works on the theory of portfolio created grounds for a microanalysis of finance as one
of the important branches of modern economic analysis. Today, investment managers are familiar
with the elements of normative mean-variance theory, providing a basis for assessing the degree of
risk of the investment in securities.
The works of such well-known representatives of the neoclassical theory of corporate finance
of Franko Modigliani (1918-2003) and Merton Miller (1923-2000) ‘The Cost of Capital, Corporation
Finance and the Theory of Investment’ (1958) and ‘Dividend policy, growth and the valuation of
shares’ (1961) also merit our attention [5]. They are the authors of the ‘Capital Structure Theory’,
according to which in the financial market the value of equity rights is determined by the
capitalization rate of expected income and does not depend on the structure of its capital. Modified
Modigliani-Miller theorem (hereinafter referred to as MM) with allowance for the cost factor for an
elimination of the financial difficulties argues that the existence of a certain share of borrowed
capital is beneficial to the company, but its excessive use is harmful, and there is an optimal share of
the borrowed capital for each organization. For their achievements, the authors became laureates of
the Nobel Prize in economics of 1985 and 1990, respectively.
In 1962, in the ‘The Investment, Financing, and Valuation of the Corporation’ the American
economist Myron Gordon (1920-2010) developed a model of his name ‘Gordon Growth Model’, in
which for the first time the discounted cash flow method was applied in corporate financial
management for the modeling of owners' equity prices [6].
The works of the academic economist of the Stanford University, USA, William Sharpe
(born in 1934) deserves attention during this period. In his work ‘Capital Asset Prices: A Theory of
Market Equilibrium under Conditions of Risk’, published in 1964, the author described the theory of
financial assets pricing, identifying two types of risks of the investments in securities: systematic
and unsystematic. Second, he is the author of the Capital Asset Pricing Model – CAPM, on its basis
the corporation can determine the price of capital required to run a business. Today this model is
still used by the economists [7].
The last fifth stage in the development of financial management covers the period from
1980 to the present time. This period is characterized by the globalization processes of the
development of national economies, the integration of theoretical conclusions of various scientific
schools (American, European, Japanese and others) concerning the basic conceptual approaches to
the management of an enterprise.
The results of academic pursuits in financial management were the development of new
financial instruments and financial technologies in the area of corporate finance management
(concepts of the value-based management, designation of organisation models, integral indicators of
enterprise performance, the principles and models of financial support for enterprise’s sustainable
growth, the system of methods for fundamental analysis of financial market conjuncture). In
addition, a new branch of financial science – financial engineering began to evolve.
Certain theories and models of financial management that emerged in this period will be
considered.
It stands to mention the famous academic economist of this period Gordon Donaldson (born
in 1931), an expert in corporate financial management who had an enormous influence at Harvard
Business School (HBS) as a professor, mentor, researcher, and administrator from 1955 to 1993. In
his work ‘Managing Corporate Wealth’ (1984) developed the concept of subordination or Pecking
Order of the sources of capital structure formation, later became known as hierarchy theory [8].
Essentially, enterprises should first use internal financial sources such as profit and depreciation.
The dividend rate should correspond to the needs of future investments. If it is necessary to attract
external sources, there should be such a sequence: bank loans, the issue of convertible bonds and,
finally, the issue of shares.
Based on the comparative analysis of the theories of MM and G. Donaldson, Stewart C.
Myers developed the theory of asymmetric information. The theory of asymmetric information
implies that the scope, completeness, and quality of information about the financial condition of the
corporation available to its managers may differ significantly from that, received by the investors
[9]. According to S. Myers, in order to eliminate the inequality of access to information, corporate
managers should take care of the dissemination of favorable information, and then investors will
pay more for the shares of the corporation. For instance, when a company increases dividends and
expands its investments, the price of its shares on the market increases and, conversely, when
dividends are decreasing, investments are reducing, and the company attracts new additional
sources of financing, its stock price falls.
The Canadian economist Myron Samuel Scholes (born in 1941) is another prominent scholar
of this period, who was awarded the Nobel Prize in Economics in 1997 ‘for a new method to
determine the value of derivatives’, what is important for the development of financial management
[10]. In his work ’The Pricing of Options and Corporate Liabilities’, the author developed a method
for determining the value of an option that does not require an application of a specific risk
premium.
4. CONCLUSIONS
Thus, a retrospective analysis of the major stages of establishment and development of the
financial management allows us to conclude that financial management as a science emerged in the
mid-twentieth century in the countries with market economies under these preconditions:
the foundations for a general theory of market economy were laid;
the industrial management, based on large-scale production and public ownership,
reached high development level;
the market infrastructure was formed, involving an effective system of legal institutions;
the system of financial intermediaries evolved both within countries and international
financial institutions;
reinforced competition in the financial and commodity markets;
increased role of the intellectual component of the economy.
Over the hundred-year period of its existence, the financial management has significantly
extended the range of studied problems – at its inception, it considered mainly the financial issues
of the establishment of new companies, and later – the management of financial investments and
bankruptcy problems, and now it includes virtually all areas of corporate finance management. In
recent years, a number of financial management issues have received in-depth development in new,
independent knowledge areas – financial analysis, investment management, risk management,
crisis management of enterprise under the threat of bankruptcy.
Under globalizing world economy, universalization of the world's information processes and
complication of the system of internal and external financial relations of economic entities, the
necessity for a long-term financial forecasting and planning, application of new financial
instruments and leverages, better understanding of the mechanism of international finance,
development of specialized information systems to support financial decisions became obvious.
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M.: INFRA-M, 1997. – 1024 p.
8. Donaldson, Gordon. 1984. Managing Corporate Wealth: The Operation of a Comprehensive
Financial Goal System. New York: Praeger.
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(Spring 2001), pp. 81-102.
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Through the Prism of the Centuries: in 5 Volumes / Lomonosov Moscow State University; [Co-
chairman of the Editorial Board: G. G. Fetisov, A. G. Khudokormov]. Vol. V, Book 2. World
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Lecturer PhD Gheorghe MOROŞAN
Stefan cel Mare University of Suceava, Romania [email protected]
Lecturer PhD Iulian CONDRATOV
Stefan cel Mare University of Suceava, Romania [email protected]
Student Aurica Trandafira SOFIAN
Stefan cel Mare University of Suceava, Romania [email protected]
Abstract:
The purpose of this paper is to highlight the correlations existing between credit and GDP; it will be shown, as
well, which is the credit influence on the economic growth. The motivation for this work derives from the fact that, at
the national level, has been discussed countless ways for ensuring economic growth. The objectives followed within the
present paper takes into account, mainly, to: introduce the main theoretical aspects related to credit; present the main
theories of economic growth; analyze and interpret the macroeconomic indicators, relevant for economic growth at the
macro level; analyze the existing relations between credit and economic growth as well as the credit influence on GDP.
The paper focuses on the existing correlations between credit and economic growth, determined using the SPSS
program.
Key words: credit, economic growth, GDP, economic sectors, outstanding loans
JEL classification: E44, O47
1. THEORETICAL ASPECTS REGARDING THE CREDIT INFLUENCE ON THE
ECONOMIC GROWTH
Analyzing the lately situation of the Romanian economy, we can say that its evolution was
influenced by a number of factors that led either to its increase, referring to the economic boom
before 2008, either to what happened in the years ahead when Romania entered recession. We
observed so, that after this increase, followed a period of economic crisis that has left its mark on
the future of economic development. A number of factors have influenced directly or indirectly the
economic growth in Romania. We find that the development/growth of an economy (Armeanu et.
al., 2015, p.6) is determined by the stability and development of the banking sector, especially
given that the financing of our economy depends largely on the lending activity.
1.1. THE CREDIT IN THE ECONOMIC THEORY
The credit notion (Moroșan, 2009, p.11) can be approached from many points of view, due
to the fact that is used in accounting, banking activity, trade activity as well as in the relationship
between humans. Furthermore, credit has a broader use in the financial – banking domain as well as
in the commercial one; for this reason the term refers implicitly to the relationship between the bank
and the individuals or legal entities. Over the time, have been developed a number of theories
regarding the credit concept by which have been noted that the credit relations have gradually
developed based on merchandise production, based on merchandise-money ratio.
We can emphasize that the money genesis and its importance has been discussed by many
theorists over time, for which we shall analyze the impact of the quantitative theory of money on
credit in economy. Thus, by this theory we deduce the importance of monetary and fiscal policy for
the economic development and growth. Based on this theory (Chirleșan, 2010, p. 49), are debated
the ideas conceived by Keynesians and monetarists regarding the monetary policy, this having
effects on the economy, since the monetary policy (Chirleșan, 2010, p. 37) envisages to control: the
expansion or the capping loans, granting directed loans and to support the labor full employment.
Expansionist theory, which has been shaped by the English economist John Law, who
believes that the economy lacks proper monetary means/ways for the economic cycle to dispose of
unused resources arising from unused lands. According to John Law, ”credit means money” and
with its help can be created the means that economy needs to be put into motion. Referring as well
to the ideas of John Law, Mac McLeod echoed those ideas and found that the one which gives
purchasing power is the credit; the banks are creating credit, reason for which leverage can be made
based on credit, but the credit itself cannot create capital.
Based on the theories of Keynes (Chirlesan, 2010, p. 81), an advocate of the quantity theory
of money, we find that money had a secondary role, but the instability of money value can have
negative effects on the economy. J. M. Keynes highlights the regulated credit theory upon which
concluded that it is possible to increase the solvable demand by means of loans, stimulating in this
way production and investment. By regulated credit, Keynes wants to ensure stabilization of the
market economy for a future good economic development. Based as well on the regulated credit,
Sumner Slichter maintains that it is necessary that, in periods of revival and expansion of the
economy, the credit granting to be limited; during the crisis occurrence, to increase loans granting
in order to be able to use both, saved resources as well as resources created by monetary emissions.
Another theory that occurs over time is the loan funds theory, according to which the market
participants are individuals and legal entities, the government and foreign investors. In addition, the
theory of loan funds develops around the supply and demand of loan funds because the need for
money determines the demand for credit, as well as the availability of those who give loans
determines the credit supply, reason for which the changes occurred on the level of these funds are
reflected on interest rate level. According to this theory, the interest rate level will rise when the
loan funds demand exceeds the supply and will fall when the loan funds supply will exceed the
demands. Thereby, the application of this theory takes into account the forecast and determination
of the market interest rates evolution, because changes that occur in the loans volume affects
interest rates, therefore between credit and interest rate there is an inverse relationship. Later, the
credit importance (Moroşan, 2009, pp. 18-23) has been highlighted in the economic thought by the
monetarist theory appearance.
We believe that, through the credit is increased the productive power of capital, are made
available liquid funds for investments or current activities, contributing in this way, greatly, to the
economy development. In other words, the credit represents a connection center between banks and
market participants, being an indispensable link in the process of sustainable economic growth.
1.2. MAY THE ECONOMIC DEVELOPMENT EXIST WITHOUT CREDITING?
Regarding the relationship between the economic growth and credit we can say that this is
one of the most discussed concepts at the moment, due to the fact that more specialists wants to
highlight the existing correlations between economic growth and credit. Economic growth is
defined "as a measure of the positive GDP change in an economy" (Howitt, Weil, 2008), reason for
which the production increase is associated with improved living standards. According to Joseph
Schumpeter (Schumpeter, 2011) economic growth is associated with economic development which
is concretized by a spontaneous economic change that will highlight the general economic growth.
In the vision of Simon Kuznets "the economic growth is, essentially, a quantitative concept"
(Kuznets, 1996, p.16) which sustain the progress.
The economic growth process (Mihuţ 2013, p.19) is influenced by political, economic
(human resources, human capital, technological progress, foreign investments, the degree of
economic openness) institutional, cultural and social factors. Economic growth is accompanied by a
high degree of convergence showing that, through it, the GDP components will be increased,
generating, thereby, quantitative and qualitative changes at the economy level. In addition, when we
talk about economic growth in Romania, we have to take into account the risks that may occur,
reason for which are considered to be found three traps involved in this process. According to
Daniel Dăianu the three traps (Daianu, 2015, p. 203) show mainly that:
the first trap is related to the interest rates, namely if the credit will be more fragile and more
expensive, interest rates tend to increase gradually
the second trap is related to the average income per capita (middle level income trap), which
highlights the idea that the level of human and physical capital, is not sufficiently advanced
to be able to reach the level of developed countries, even though the workforce of our
country has lower costs compared to developed countries;
the third trap refers to the inability to increase the domestic savings rate and to mobilize
internal resources (reserves), due to the fact that it is important for the country development
to be based on internal efforts/domestic savings.
1.3. THE CREDIT ACTIVITY IN ROMANIA IN THE PERIOD 2007 - 2015
In the following, we intend to highlight the credit evolution in Romania to show how much
it influences the economy. The following table illustrates the credit evolution by sectors and by
currencies types.
Table no.1. The credit evolution in the period 2007-2015
Years
Total Credit
(millions lei)
From which
Private sector
(millions lei)
Governmental sector
(millions lei)
Lei
(millions)
Currency
(millions)
2007 157.751,3 148.180,7 9.570,6 67.713,0 80.467,8
2008 215.260,9 198.055,7 17.205,2 83.643,2 114.412,5
2009 246.697,9 199.887,1 46.810,8 79.711,7 120.175,4
2010 270.668,0 209.293,6 61.374,5 77.358,5 131.935,1
2011 293.952,9 223.037,1 70.915,8 81.658,7 141.378,4
2012 304.689,0 225.836,2 78.852,8 84.722,8 141.113,4
2013 298.922,5 218.462,3 80.460,2 85.354,0 133.108,3
2014 297.710,8 211.164,1 85.546,6 92.100,0 119.064,1
2015 307.149,6 217.532,3 89.617,3 110.285,9 107.246,4
Source: Processed by NBR monthly bulletins 2007-2015
Based on the above data, it can be seen that in the period 2007- 2012 the volume of loans
granted by banks in Romania has a growing trend. This increase is especially manifested in the
private sector which registers 74.12% of total credit. The period 2012-2015 shows that the total
volume of loans is slightly down due to the decrease in private sector credits and the credits in
currency. We can see that, in this period, currency credit decreased by 24.14% since 2012. This
decrease was due to the NBR imposed measures to curb the imports rising and to reduce credit risk.
By existing regulations, NBR requires that when loans in currency are granted to legal entities to be
considered sources of income, in the same currency, for repaying the loan. By adopting these
measures, currency loans has diminished and caused increases in the lei (RON) component.
In 2015, the loans demand is increasing. According to NBR statistics this increase is due to
the expansion of consumer credit granted to the individuals, as a result of their confidence in the
earnings growth. As noted above, the credit granted to the private sector has a higher share than the
one granted to the state sector, highlighting the fact that the credit process is mainly addressed to
this sector. The credit maturity structure to the private sector shows that the most important
components are the medium and long term loans. In the period 2007-2012 medium-term loans
decrease in importance in the disfavor of the long - term loan. The cause may be found in the
investments made by firms and households, requiring these types of loans. In the next period it can
be seen that the trend of the medium-term credit is raising and the long-term credit is declining,
mainly due to the restrictions on long-term lending imposed by NBR as well as by the lower
appetite of the private sector in making investments. In the case of long-term loans it can be seen
that they have a downward trend starting with 2011. Regarding short-term credit, it maintained its
importance around 30% of the total, throughout the considered period. Through this type of loan is
ensured the current activity of companies and individuals.
2.1. THE EVOLUTION OF CREDITS GRANTED TO INDIVIDUALS
It is well known that, at the moment most of the individuals need a loan, to meet their
different needs, and when cash is needed they often appeal to a bank. There is a wide range of loans
that can be granted to individuals depending on their request. Basically, the rules of crediting
applied to individuals are valid in the case of the legal entities as well but, for individuals, the
amounts borrowed are lower and the risk of bank is lower than in the case when the credit would be
given to the legal entities. When an individual requests a loan he must have sources of repayment,
to guarantee the repayment of the required loans and to not have outstanding obligations to banks.
Therefore (Moroșan, 2009, p.165) an individual is applying for a loan when it has to pay a number
of debts or if he wants to acquire an asset (household goods, houses, cars etc.).
Regarding Romania, the types of credits to individuals is reflected in credits on cards;
personal credits; credits for consumer goods; credits for automobiles purchasing; credits for
personal needs unnamed, secured by mortgage; credits for construction, purchasing or upgrading
homes and vacation homes. Through consumer credits granted to individuals, the banks are
participating in: raising living standards, increasing the country prosperity and increasing the
economy demand. Therefore, in terms of lending to individuals, the role of banks (Neagu, 2015)
will highlight the satisfaction of social needs, by increasing the endowment of households with
durable goods and houses, without being able to calculate exactly how this sector can generate
added value and, default, economic growth. Based on existing data NBR Monthly Bulletin (2007-
2015) we notice that they have the tendency to increase until 2011, followed by a slight decline by
the end of 2014. This evolution is supported by the growth of consumer credit and housing credit.
In 2015, household credit growth is due to, on the one hand consumer credits (0.03%) and housing
credits (11%) especially those in RON. The rising of household credit means that the population is
estimating sufficient income in the future thus, trusting in their repayment options. The growth
registered in 2015 is mainly due to the consumption component, being supported by lower interest
rates. Therefore, individuals have purchased homes and they need money to arrange them; most of
the consumer credit volume is required for the housing development and modernization.
According to Dragos Cabat (www.economica.net, 2016), a cause which led to growth in
lending to individuals is the fiscal relaxation which induced to Romanians the feeling that their
incomes will increase in future and that they can afford new indebtedness. This highlights the idea
that the population trusts the evolution of the economy and the GDP ability to support the loans
repayment
2.2. THE EVOLUTION OF CREDITS GRANTED TO BUSINESS
Regarding the credits granted to legal entities, we deduce that their destination is to meet the
current financial needs and the financing of investments, reason for which this type of loan is more
correlated with the economic cycle than the one to the population, due to the fact that lending the
companies will have a significant contribution in the development and growth of the country.
According to Florin Neagu (Neagu, 2015), companies are calling more often to bank resources; due
to this fact that at the level of 2014, approximately 10-15% of companies had a credit. In addition,
based on the cycle of credit granted to companies, we could assist to an economic growth because
their contribution will generate added value needed by the economy. Thereby, to have a sustainable
economic development we should focus on lending to companies that will generate the necessary
potential to finance and support the country economy. According to the data from NBR Monthly
Bulletin (2007-2015), it can be observed that the volume of loans granted to firms has an upward
trend until 2012 and, starting with this year, has a downward trend. A main cause of reducing credit
volume granted to firms is considered the production cuts, which induce the stagnation of this type
of loan. It can be seen that the structure of credit is largely influenced by the credit component in
RON which increases by 8.9% in 2015 compared to 2014, while the currency component (euro)
decreases by 9.9%.
NBR governor (Isarescu, 2016) claims, in a press release, that the increase of loans in lei
(RON) is mainly due to the conversion of foreign currency loans and not due to the lending in
RON. Although the loan granted to companies is slightly higher, in the Romanian economy there is
a potential for sustainable lending that is not exploited. This slight growth highlights the capacity of
the Romanian performing companies, which through a significant lending volume can influence the
economic situation. In addition, these companies (Neagu, 2015) contribute with 22.2% to the added
value that is generated in the economy and they have a production capacity of approximately 18.5%
of the turnover. Therefore, the potential of these companies must be exploited mainly for the
prosperity and efficient growth of the Romanian economy.
In the following, we will highlight a comparative situation of the total credit evolution,
lending to companies and to households/population. It can be seen that in 2015 household loans
(107.960,2 million RON) exceeds lending to businesses (105.333,1 million RON), indicating that
the pace of lending to population is higher than to companies. However, analysts claim that we are
facing a situation highlighting the idea that the economy puts the credit moving, as Florin Cîţu
stated (www.economica.net, 2016), observing the situation of the two types of loans, we can deduce
that from 2011 to 2014, the volume of loans granted to companies was higher than the one granted
to population. At the same time, we can take into account that the process of crediting in lei grew
rapidly and became major due to the decrease of monetary policy interest rate and due to the
increased appetite for first home credits, which are granted exclusively in lei, but also due to the
conversion programs of currency loans, particularly the loans in Swiss francs. Therefore, this
situation is caused, mainly, by an increased consumption based on reviving the mortgage lending.
2.3. THE EVOLUTION OF NON-PERFORMING LOANS
The non-performing loans represents payment commitments that the client, individual or
legal entity, do not respect, thereby creating outstanding loans or unpaid interest that will have
negative effects on the banks asset, solvency and costs. That’s why a non-performing loan (NPL) is
an ordinary loan that is or can be recorded by banks as a credit which brings loses. Therefore these
types of loans are considered to be one of the main causes leading to the national economy
stagnation. Thus, non-performing loans represents "the amount of money borrowed from a bank, for
which the borrower did not made payments related to loan in less than 90 days"
(www.investopedia.com, 2016).Once a loan is considered nonperforming, the possibility that it will
be repaid in its total amount is very small. Consequently, the institutions that record nonperforming
loans in their portfolios they have the possibility to sell them to other investors for escaping from
future risks and also to clear their balance sheets, influencing positively the entity-s profit.
The national definition, used by NBR for the non-performing loan indicator, considers the
outstanding loans over 90 days and the ones in the case of which were initiated judicial
proceedings, non-performing loans being calculated on their gross value (respectively, accounting
value undiminished with adjustments for depreciation or the value of associated guarantees).
According to Petre Bunescu (Bunescu, 2015), nonperforming loans in the Romanian banking
system, were generated, on the one hand by the bankers mistakes and secondly, by the economic
crisis, reason for which a balance sheets cleaning is necessary to can held the economic
development.
Non-performing loans evolution in Romania is calculated based on NPL rate (the ratio of
nonperforming loans to total credit). This indicator is showing the banking system state. Therefore,
in the following, we highlight the evolution of NPL in Romania.
Table no. 2. The evolution of non-performing loans
Years
2008
2009
2010
2011
2012
2013
2014
2015
NPL rate
(%)
2,75
7,89
11,85
14,33
18,24
21,87
13,94
13,61
Source: Processed by NBR, Interactive database
Analyzing the data above, it can be seen that after the economic boom, the trend of non-
performing loans is growing, reaching in 2013 to 21.87% of total loans, as a result of the base effect
occurrence (decreased volume of loans to 195.1 billion in December 2013 respectively 194.2 billion
lei in 2014) but also due to the economic situation of 2009-2012 period characterized by stagnation
and crisis. This highlights the fact that a large proportion of non-performing loans (Vioreanu, 2015)
is due to the fact that companies became insolvent or bankrupt but also due to the household
incomes decline which could not repay the loan. Due to this situation, the central bank NBR,
decides to implement a restructuring plan for eliminating the NPL from the assets portfolios and
banks capitalization. Therefore, we can observe in 2014 and 2015 a significant decline in the stock
of non-performing loans (NBR, 2014) which were passed off the balance sheet or have been sold
for recovery. In 2015 the rate of non-performing loans continued to decline, reaching 13.61%,
which proves that the process of balance sheet cleaning has been efficient. We will approach non-
performing loans analysis by sector of activity for 2014 and 2015, to determine whether certain
economic sectors have generated this type of loan.
Table no. 3. The volume of performing and non-performing loans depending on the sector of
activity (2014)
Sector of activity
Volume of performing loans
(2014) billions lei
Volume of NPL
(2014) billions lei
The share of NPL in
performing loans (%)
2014 2015 2014 2015 2014 2015
Agriculture 5.8 5.9 1.2 1.2 21,03 20,38
Industry 21.7 23.1 5.9 4.5 27,05 19,56
Trade 19.4 20.1 6.1 4.5 31,62 22,41
Services and utilities 19.3 19.1 3.3 2.8 17,18 14,53
Constructions and real
estate
19.3 19.0 7.6 6.0 39,21 31,34
Source: Processed by NBR, Interactive database
In 2014, the NPL related to construction and real estate sector, as well as trade sector, makes
a strong pressure on banks recording a significant share in the total. We can see that these economic
branches have been the most affected by crisis, that-s why the NPL volume is not a surprise.
Another sector which recorded a high value is the agriculture. We can say that, although agriculture
is a contributor to the creation of GDP, due to NPL and to production fluctuation recorded (due to
climatic conditions) its influence on the economic growth is weak and unpredictable. According to
the analyzed data, as in 2014, the construction and the real estate sectors continues to present the
highest credit risk, the volume of NPL recorded a value of 5.9 billion lei. We can see that a
significant share of nonperforming rate has been recorded in the service and utilities sectors,
followed by agriculture.
According to those analyzed, credit institutions are moving towards sectors which brings
added value to the economy, those supporting Romania's economic growth model, respectively
those having the ability to honor their debts to banks compared with the rest of the economy.
Therefore, non-performing loans represents an element which generates negative effects for the
economy because, as we have shown, their decrease lead to value increases at the national level,
instead their alert growth leads to: economic imbalances, insolvency of firms, to their bankruptcy
and to negative effects on credit institutions. Therefore, the Romanian economy needs an efficient
lending process to awake the company’s credit appetite, especially due to the significant potential
which can lead to a sustainable resumption of lending. For this, we need a greater funding for
companies operating in innovating industries, generating added value. In this way we can bring, on
the one hand, benefits to the banking system and on the other hand to the economy.
3. THE EVOLUTION OF ECONOMY IN THE PERIOD 2007 – 2015 IN ROMANIA
As far as we know, the economic growth is associated with the gradual increase of the GDP
components, namely the consumption, exports and investment increase. Furthermore, we can talk
about economic increase when the GDP growth rate, registers positives values. The GDP highlights
the final value of products and services obtained by the economic entities which develop their
activity on the Romanian territory, having as destination the final consume. This indicator brings
forward the size of the gross added value generated by the products and services produced within a
country. As such, GDP may be defined as being the sum of added values generated by the goods
that have been created by the economic entities within a country (Năstase et.al. 2008).
GDP is an economic indicator which analyzes the wealth produced annually in a country.
This indicator highlights the total value of goods and services produced in a country and aims to
measure the economic growth of the country. GDP is made up of: effective consumption, gross
capital formation, the value of the exports of goods and services and the value of imports of goods
and services. These components, through their evolution and their contribution to GDP, will
influence the situation of the national economy.
Looking at the economy through this indicator we can highlight that in the last years it
indicates economic growth. However, economy evolution is not free of risks, because the economic
growth began to be determined mainly by consumption, while the potential level of GDP is still
affected by the poor state of the transport infrastructure, the insufficient level of European funds
absorption, the payment indiscipline of companies or by the budgetary adjustment which was
mainly achieved through expenses cuts, on the background of investment planned failure. Another
risk that occurs at the level of these evolutions is reflected by the inflation reduction which was
especially, due to, internationally decrease in fuel prices and domestic decrease of VAT on food,
marking the persistence of inflationary pressures manifesting after the exhaustion of the base effect.
Economic growth takes into account the lending process because, as we showed in the
previous chapter, the credit contributes to the national economy development. Forwards, we will
show the GDP evolution and the share of economic sectors to GDP growth. Therefore, as can be
seen from the data bellow, GDP maintains its upward trend, which shows that the production of
goods and services is growing. This GDP increase is mainly due to the results from agriculture, in
some years, services and construction in the others.
Table no. 4. GDP evolution in the period 2007-2015
Years
GDP (millions lei)
I Quarter II Quarter III Quarter IV Quarter Total
2007 78.168,1 95.567,1 112.064,1 132.458,6 418.257,9
2008 99.042,4 121.805,6 143.875,8 159.664,9 524.388,7
2009 98.906,9 119.631,6 136.070,5 155.913,8 510.522,8
2010 103.791,6 125.279,8 145.033,7 159.776,0 533.881,1
2011 110.356,9 131.176,9 156.218,5 167.345,5 565.097,9
2012 113.796,0 140.715,6 164.408,8 176.446,9 595.367,3
2013 121.620,7 148.256,7 176.151,3 191.427,3 637.456,0
2014 129.643,5 156.353,5 183.672,1 197.908,3 667.577,4
2015 140.355,7 162.661,5 197.252,5 209.996,9 710.266,6
Source: Processed by Eurostat
Although GDP has met an upward trend, Romania is facing a paradox: the economy is
growing but the standard of living does not have the same tendency. This phenomenon can be
explained through the fact that Romanian society is strongly influenced by income, which makes
people perceive an improvement in living standards only if their revenues increase. In other words,
their growth comes from those gains that were made abroad or other revenues that were never
reported and, therefore, they could not be taken into the calculation of these indicators. Better said,
without the existence of this data, the indicators would show another situation nationally. Forwards,
we will show the participation of each economic sector to GDP creation.
Table no. 5. The participation of economic sectors to GDP creation
Years Agriculture (%) Industry (%) Construction (%) Services (%)
2007 -26,8 0,0 28,6 12,9
2008 28,1 6,1 32,0 3,9
2009 -8,7 -1,1 -14,5 -6,5
2010 10,0 4,6 -3,0 -4,8
2011 13,9 0,1 -19,1 2,7
2012 -26,1 -7,0 -1,1 9,2
2013 33,7 4,0 4,4 1,4
2014 2,4 3,7 2,3 2,5
2015 -9,4 2,0 8,8 4,6
Source: Processed by MFP
According to the above data, we can observe that in some years, agriculture has contributed
to GDP growth in high proportions and the other sectors less. This highlights the fact that in terms
of GDP value growth, agriculture has a significant influence. From the perspective of agriculture
sector lending we can say that it has not a significant influence because the loans level granted to
this sector is low. Starting with 2014 we can note that this sector participate less and less to the
GDP creation letting the industry to bring a plus to the economy. In 2015, the agriculture sector
recorded negative values (- 9.4%), while the construction sector (8.8%) and services (4.6%) shows
signs of recovery, which means that the economy was based on these sectors to generate growth.
Based on the above data we can see that in the recent years the sectorial structure of the
economy, measured by their contribution to GDP, was close to that of the euro area (in particular by
the decreasing of agriculture sector), a favorable evolution for the mitigation effects of some
possible asymmetric shocks.
In the following, we analyze which sectors participating in GDP creation were credited, to
highlight whether the economy has grown or not, by crediting activity. Regarding the lending
potential of these sectors, we can see that credits are granted in industries that have had a significant
impact on economic growth. We note that the main sector which has a high volume of loans is the
industry, with a value above the aggregate value of the other economic sectors, namely 51.34% of
the total lending potential, followed by services and utilities sectors with a share of 26.6% and trade
with a plus of 10.3%. Therefore, we identify that there is a high potential in lending companies
despite the fact that the economy has developed based on consumer credit growth.
0
500
1000
1500
2000
2500
3000
3500
0
10.000.000.000
20.000.000.000
30.000.000.000
40.000.000.000
50.000.000.000
60.000.000.000
70.000.000.000
Agricultură Industrie Servicii şi utilităţi Construcţii şi
imobiliare
Comerţ
mld lei
Potenţial creditare (sc. dr.) mld. Lei Număr companii (sc. st.)
Chart no. 1. The volume of lending granted to firms depending on sectors of activity in 2014
Source: Processed by NBR, Financial Stability Report, 2015
It can be noted that the sectors which have significant influence on economic growth
(industry, construction and trade) are the most credited, resulting that the credit evolution in
economy has a direct influence on the macroeconomic situation. In conclusion, the bank loan is one
which promotes economic progress both, through companies from the economic sectors
participating in the creation of GDP, as well as by the consumer credit generated by the population.
Today we are facing a GDP increase and, implicitly an economy increase on the background
of a very low inflation rate of -0.6% in 2015. Hence, the above idea of inverse relationship is
applicable. Thus, low inflation rates generate a high purchasing power which stimulates the
production of goods and services that leads to a GDP increase and also of the economy. As Mugur
Isărescu stated (Isărescu, 2016), low inflation is not a reason to be concerned because to have
higher economic growth we must encourage work, productivity, innovation and the performing
management.
Regarding the unemployment rate it can be observed the slightly downward tendency which
shows that the population is open to work. This is mainly due to the net salary increase which has
boosted the population to occupy a job. Therefore, the labor market is an important factor in the
Romanian economy because if there is labor there is a demand that will spur the investments and
thus, will be observed a positive influence at the national level. Based on realized studies (Țoțan, et.
al., 2016) demonstrates that, while the GDP value is growing the number of unemployed is lower.
Thus, as can be seen, in 2015 the unemployment rate is declining (6.5%) and GDP is growing
(3.8%).
4. THE CREDIT INFLUENCE ON ECONOMIC GROWTH IN THE PERIOD 2007 –
2015 IN ROMANIA
The assumption on which this study was conducted is based on the fact that the economic
growth is influenced by credit in high proportions. Therefore we will analyze the existing
correlations between GDP and credit indicators based on the results of the SPSS, a program for
statistical analysis of data used for data editing, results processing and their presentation, either
numerical or graphical form. Were analyzed the GDP values and credit volume in the economy.
The analyzed values are presented in national currency, respectively millions RON, and were
collected from NBR statistics. These values have been entered into the SPSS program and the
means used is the regression method.
The regression function is analytically describing a mathematical relationship between a
dependent variable and independent variables. In this case the dependent variable (effect) is the
GDP, and the independent variable (cause) is the lending volume. The regression model is
highlighted by the linear regression function which has the following form: y = a + bx where y is
the dependent variable, x is the independent variable, a and b are the regression coefficients. In this
Agriculture Industry Services and utilities Constructions Trade
and real estate
Lending potențial (sc. dr.) billions lei Lending potențial (sc. st.)
billions lei
paper, the regression model has the form: GDP = a + b *Total credit. The main issues arising from
the performed analysis are:
Economic growth is based mainly on credit in the economy, especially on the consumer
credit that began to grow in the recent years (2015).
Lending/crediting is an important means for financing the Romanian economy both, for the
state and for the private sector (firms and individuals/households).
A negative influence on economic growth is caused by the non-performing loans existence.
To prove that the economy is influenced in high proportions by the credit volume and
development/evolution, an analysis has been performed using SPSS software program. The data
used in the study are the quarterly amounts of GDP and credit values. The credit volume and its
evolution were analyzed by sector, whereas we try to highlight the extent to which the lending to
state and private sector made a contribution to the economic growth. It was found that by applying
the regression method, the model chosen is significant and deserves to be analyzed because the
correlation coefficient (R-Square) is located within the limits (0≤R≤1) and the reduced value,
significantly different from 0, of Significance F strengthens the premise underlying this study. The
results are shown in Annex 1.
5. CONCLUSIONS
According to the results generated by SPSS, regarding the implications of credit, on the
economic growth was found that:
the link between economic growth and lending is of medium intensity, because due to the
correlations established, the determination coefficient (R-Square) settled at the level of total
credit, is contributing to GDP growth in a 40% share.
the level of GDP is influenced both, by the private sector with a share of 35% and by the
public sector with a share of 40%. This highlights the fact that the share of government
credit is 5 percent higher than the non-government credit.
household loan affects GDP growth in a rate of 34%.
the level of loans granted to companies have made a positive contribution of 32% to GDP,
lower than credit granted to individuals.
It appears that in 2013 it has been registered an economic growth despite the decrease of
bank credit volume, and in 2014 and 2015 this increase was based on the production capacity,
which marks the fact that there has been a break between lending and economy, but this decoupling
takes place under certain conditions (those circumstances show that new loans will condition the
economic revival, but not any revival is the equivalent of growing). However, when we talk about
the decoupling between credit and economic growth we must distinguish between the loan stock
and production, because their decoupling occurs when banks operate with write-offs (deletions of
some assets from the balance sheet), even if they are granting new loans. Another requirement takes
into account the ”liquidity trap” because some banks, although they have ”piles of money”, they are
reluctant to grant loans.
This decoupling occurs due to the fact that financing the economy does not means only bank
component, because the liquidity that is not caught in the monetary statistics can help to finance the
economy, reason for which the economic recovery is easier. Thus, we can talk about economic
growth without credit if the country's financing is supported by other factors, such as imports and
exports for example, attracting European funds that will determine the infrastructure modernization,
increased competitiveness and, implicitly, creating additional liquidity for the economy. In other
words, it becomes necessary, for medium and long term, to have adequate funding, being bank or
other sources, so that we can economically revive. Therefore, it is necessary to maintain a balanced
credit stock and to not impede new loans development because the growth of these loans will also
increase the credit stock. Therefore, the national economy has grown mainly due to household loans
and due to consumer loans. Within this study we found that the loan process is an essential factor
and without it an economy cannot develop. Thus, we can say that once with the lending activity
increase, the economy will record growth, whereas it is one of the important development factors.
BIBLIOGRAPHY
1. Armeanu, D., Pascal, C., et al, 2015, The credit impact on the economic growth, Theoretical
and Applied Economics, Volume XXII, No. 1(602) 2. Chirleșan, D., 2010, Metodele acțiunii bancare & gestiunea finanțelor publice, Editura
Universității „Alexandru Ioan Cuza”, Iași, Vol.I 3. Dăianu, D., 2015, Marele impas în Europa, Editura Polirom, Iași 4. Isărescu, M., 2016, O bună parte din creşterea creditului în lei vine din convertirea celor în
valută, www.capital.ro, accesed on 07.04.2016
5. Isărescu, M., Inflația rămâne în teritoriu negativ până în iulie 2016, www.agerpress.ro,
accessed on 24.04.2016
6. Moroșan, Gh., 2009, Creditele și plasamentele bancare în titluri de valori mobiliare,
Editura Didactică și Pedagogică R.A București
7. Năstase, C., et.al., 2008, Macroeconomie: concepte fundamentale, Editura Didactică și
Pedagogică, București
8. Neagu, F., 2015, Rolul băncilor din România în generarea de creștere economică,
www.opinii.bnr, accessed on 05.04.2016
9. Vioreanu, V., 2015, Un nou record al creditelor neperformante, www.capital.ro, accessed
on 09.04.2016
10. Ţoțan, L., Ș., Popescu, B., B., et al., Impactul şomajului asupra creşterii economice din
România, în perioada de criză, www.revistadestatistica.ro, accessed on 25.04.2016
11. BNR, Raport anual, 2014
12. BNR, Raport asupra stabilității financiare, 2014
13. BNR, Raport asupra stabilității financiare, 2015
14. BNR, Reglementarea și supravegherea bancară – principii, rol și provocări, 2015
15. Nonperforming Loan (NPL) Definition, www.investopedia.com, accessed on 09.04.2016
16. www.bancamea.md, accessed on 08.04.2016
17. www.economica.net, accessed on 05.04.2016
Lecturer PhD Cristinel ICHIM
“Ştefan cel Mare” University of Suceava, Romania [email protected]
Abstract:
This paper entitled "Public expenditure on health in local budgets" aims analysing and deepening major
spending categories that public authorities finance at local level, namely health expenditure.
In the first part of the article we have specified the content and role of this category of expenditure in local
budgets and also made some feedback on decentralization in health.
In the second part of the work, based on data available in Statistical Yearbook of Romania, we have carried out
an analysis of the dynamics of health spending from local budgets to emphasize their place and role in the health care
expenses.
The research carried out follows that the evolution and structure of health expenditure financed from local
budgets is determined, along with the legislative framework in the field, by several variables that differ from one
territorial administrative unit to another: the existence of sanitary units, their type, the involving of local public
authorities in their development and modernization, the number and the social structure of the population. The
research shows that over the period 1993-2015, the dynamics of the share of health spending in total expenditures of
local budgets is sinusoidal, with a minimum threshold in 2000 of only 0.3%.
Key words: health, local budget, public expenditure, health institutions, decentralization
JEL classification: H72, H75
1. INTRODUCTION
Given the importance for the overall development of society through shares that they occupy
in the local budgets, the public health expenditures financed from these budgets stand out. This
expenditure arises as a result of actions of local public authorities that are interested in maintaining
a good general state of health of the population as a factor for socio-economic development of local
communities. For each individual, and for the whole community, health is one of the most
important factors ensuring the performance of life and work.
The purpose of this paper is to deepen this category of expenditure funded from local
budgets by identifying its economic content and analysing from the quantitative perspective of its
evolution in the local budgets over the post-December period (as referred to in the specialized
literature between 1990 to present). Our scientific approach will highlight the role and structure of
public health expenditure in local budgets.
2. GENERAL ASPECTS OF HEALTH EXPENDITURE FINANCED FROM
LOCAL BUDGETS
Local government expenditure represents the amounts approved and made from local
budgets, budgets of public institutions wholly or partly funded from local budgets, the budgets of
the institutions entirely financed from their own budgets, external and internal loans from the
budget of external grants, within the limits and under purposes established in the respective
budgets, according to the legislation (Ichim, 2013). As opposed to the state budget expenditure,
expenditures of local budgets reflect the financial efforts made by the local public authorities to
cover the social, cultural and economic needs, the public development services and other
requirements of residents of administrative units within the competence local authorities. Due to
their importance for the overall development of society through shares that they occupy in the local
budgets, the public health expenditures financed from these budgets stand out. Until 1997, the
financing of health care in our country relied on a national health system (Oprea and Cigu, 2013),
the amounts allocated coming from the state budget, local budgets and some special funds
established (Special Fund for health, functioning between 1992 and 2000 included in the state
budget since 2001 and the national health insurance Fund, functioning since 1998 and transformed
in 2003 into unique Fund for social health insurance.)
Public expenditure on health includes two main categories of destinations: organization,
maintenance and operation of health institutions (both general expenses and medical expenses);
prevention and health education.
The efficiency of these expenses is determined from the main categories of effects that they
generate (Filip, 2002):
medical effects, with individual character, extremely important as they aimed at
restoring health, essential feature and above all for the sick and their families;
social effects, reflecting the general health of the entire population, such as average life
expectancy, morbidity, the overall mortality and infant mortality, the level of medical
healthcare (number of inhabitants per doctor, in a hospital bed, belonging to a sanitary
unit, etc.);
economic effects, which generally reflect the "unproductive" state due to unsatisfactory
health status: the average period of incapacity for work, eradication of diseases, increase
in average working lives.
Through the own budgets of communes, towns and municipalities are financed health care
in hospitals with beds and other health institutions and activities. Also the budgets of counties cover
expenditure on medical services in hospitals with beds.
3. THE ECONOMIC CONTENT OF HEALTH EXPENDITURE FROM LOCAL
BUDGETS
The transfer of the hospitals administrated by the Ministry of Health under the
administration of the county or local councils but maintaining the financial arrangements or through
contracts for medical services supply of public hospitals with health insurance providers was
regulated according to law1. Local budgets are involved in the financing of administrative and
operating expenses or goods and services, investment, repairs, consolidation, expansion and
modernization, endowment with medical equipment of health units with transferred beds within
budgetary credits approved for this purpose in the local budgets.
The land and the buildings where operate public health units of county or local clinical
hospitals and university hospitals are part of the public domain of the counties, cities and districts of
Bucharest and are given in the administration of medical units in question, by the decision of the
county or municipal council, respectively local districts of Bucharest. The county or municipal
councils, or Bucharest municipality sectors cannot charge fees and rents on land and buildings
where operate clinical hospitals and university hospitals.
The county council presidents and mayors of the communes, towns, municipalities and of
each sector of Bucharest have the following duties2:
a) to provide the necessary amounts for maintenance and management, repairs,
consolidation, extension and modernization of public health units, within the approved budgetary
credits for this purpose in local budgets;
b) to approve, within 10 days of their receipt, the draft budgets of income and expenditure,
sent by public health units;
c) to approve within five days of the receipt, the list of positions for the public health units.
The implementation of the decentralization process in the health sector aims to ensure the
principles of equity, quality, and accountability, focusing on patients within health services system.
All these principles were in varying degrees assumed and accepted by all governments after the
revolution, while being in accordance with all agreements and international documents to which
Romania is a party.
In our opinion, this process has the following advantages:
Making the allocation of own resources at county and local level according to the health
needs of the population;
Patients may become copartners in decision making, receiving necessary information and
having the opportunity to exercise control – to the desired extent – on health care decisions that
affect them directly;
Decisions will be taken quickly as the local authorities know better the health problems of
the population;
Development of specific medical services that are necessary to a certain area;
Disappearance of excessive institutional centralization currently existing.
On the other hand we can identify a number of shortcomings and disadvantages arising from
the transfer of hospitals’ administration to county councils or local councils:
Local authorities do not have enough resources which may adversely affect the proper
functioning of the hospitals;
Involving more public budgets in health financing may result in dilution of responsibilities
and much more difficult control on fluxes of formation, distribution and use of public funds, with
negative effects on public finances as a whole;
Inequities may occur, in term of population’s access to medical services, although the law
provides universal coverage and equity;
Possibility of limiting access to medical services in a county for the patients from other
counties;
Possibility of political interference in the selection of managers favouring excessive
politicization;
Another problem that we note is the risk of exacerbation of decentralization. There must be
a balance between central and local level, too much decentralization will lead to fragmentation, the
weakening or even the dissolution of state authority. In addition, certain projects in health cannot be
achieved only locally, without the intervention of the central authorities.
Also, currently, county or local councils have the possibility to establish units for medical
and social assistance3 through the reorganization of some public health units as health units where
medical services mainly address the needs of chronically ill people. Medical social assistance units
are specialized public institutions with legal personality subordinated to local public administration
authorities, providing care, medical services and social services for people with medical and social
needs.
The proposal to establish medical social units is made by the County Council or the General
Council of Bucharest, or by the mayor, as appropriate, based on the documentation and
substantiation submitted by the public service of social assistance from county councils or local
councils.
Along with the decision to establish medical social units, local and county councils, as
appropriate, approve the rules of organizing and functioning, the organizational structure and the
number of positions.
The beneficiaries of these services are people in need of medical and social care, requiring
permanent or temporary medical oversight, assistance, care, treatment, being unable to ensure their
social needs, to develop their capabilities and skills for social integration, because of economic,
physical, mental or social reasons.
Current and capital expenditure of medical-social assistance units is provided from its own
income and subsidies granted from local budgets, depending on subordination. The subsidies from
the local budgets are granted to provide medical and social services, according to the law, for
maintenance and management expenses, repairs, consolidations, independent features. The own
revenues of medical social units consist of amounts reimbursed by health insurance houses, for
medical services provided under contract, according to the framework contracts for medical
assistance from health insurance system; personal contributions of beneficiaries as established by
the decisions of local councils or county councils or the General Council of Bucharest and
sponsorships, donations and other revenue, under the law.
Public health directorates, with the approval of county councils or local councils may
establish, with the approval of the Ministry of Health, and the Ministry of Administration and
Interior, multifunctional health centers, to provide a package of health services adapted to local
community needs. Multifunctional health centers are organized as public institutions with legal
personality under public health directorates, through the reorganization of hospitals, units or
compartments, as well as in their other former, deprecated locations, or in other places.
Subsequently, multifunctional health centers will be taken over by the county councils or local
councils. The financing of multifunctional health centers is provided from their own funds and from
amounts awarded by the state budget and local budgets.
The own revenues of multifunctional health centers consist of: amounts reimbursed by
health insurance funds for contracted medical services provided; value of medical services provided
at the request of individuals or legal entities; donations, sponsorships and other revenue.
The amounts from the local budgets are granted towards the costs of maintenance and
management, repairs, consolidations and independent endowments, as well as personnel costs,
excluding the costs related to the specialized healthcare personnel, ensured from settled amounts by
health insurance houses for contracted medical services provided.
4. ANALYSIS OF PUBLIC HEALTH EXPENDITURE DYNAMICS FROM LOCAL
BUDGETS
To highlight the place occupied by the local public health expenditures within local budgets
we will use the data found in the Statistical Yearbook. Since the last two decades have been
characterized by rising prices and currency redenomination (in 2005) and in order to be conclusive,
we calculated the share of total health spending in local budgets over the period 1993-2015.
Table no. 1 - The share of health spending in total expenditures of local budgets over the
period 1993-2015
Year Share % Year Share % Year Share %
1993 14,6 2001 0,4 2009 1,1
1994 15,2 2002 0,5 2010 1,71
1995 12,5 2003 0,6 2011 2,15
1996 12,4 2004 0,8 2012 2,13
1997 12,8 2005 0,7 2013 2,17
1998 0,5 2006 0,5 2014 2,40
1999 0,4 2007 0,5 2015 2,56
2000 0,3 2008 0,6
Source: Processed Data from Statistical Yearbook of Romania 1994-2016
From the table above we identify three stages in the evolution of the share of health
spending from total expenditures of local budgets over the post-revolutionary period:
a) Over the period 1990-1997, this type of expenditure held a relatively high share of total
expenditure financed by local budgets. Thus, health expenditures financed from local budgets were
14.6% in 1993 and 15.2% in 1994, so that at the end of the period declined to 12.8%;
b) The period 1998-2006 is characterized by a significant decline in the share of public
health expenditure in the total expenditure of local budgets (about 0.5%). This decrease is due to the
fact that in 1998 local budget expenditures on health were taken by the National Health Insurance
House;
Figure no. 1. Dynamics of the share of health spending in total expenditures of local budgets
over the period 1993-2006 Source: Processed Data from Statistical Yearbook of Romania 1994-2007
c) From 2007 until now there has been an increase in the share of public health expenditure
in total local budget expenditures because in 2006 was regulated the transfer of the hospitals’
administration from the Ministry of Health to the county councils or local councils.
14.6 15.2
12.5 12.4 12.8
0.5 0.4 0.3 0.4 0.5 0.6 0.8 0.7 0.5
0
2
4
6
8
10
12
14
16
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Year
Share (%)
The share of public health spending from local budgets over the perioad 1993-2006
Figure no. 2. Dynamics of the share of health spending in total expenditures of local budgets
over the period 2007-2015
Source: Processed Data from Statistical Yearbook of Romania 2008-2016
As shown in the graph above, over the period 2007-2015 there was a tendency to increase
this percentage to 2.56% which shows that local authorities have directed significant amounts of
local budgets to health financing. It seems to me that this upward trend will continue in coming
years.
5. CONCLUSIONS
The scientific approach initiated and realized through this paper is the basis for drawing
conclusions on public health expenditure financed from local budgets.
It notes the importance of these categories of expenditures for the local community which is
interested in people’s good health, a key factor for their socio-economic development. The transfer
of the hospitals’ administration from the Ministry of Health to the county councils or local councils
was regulated under the legislation while maintaining financial arrangements or contracts for the
supply of medical services of public hospitals with health insurance providers. Local budgets
participate in the financing of administrative and operating expenses, respectively goods and
services, investment, repairs, consolidation, expansion and modernization, endowment with medical
equipment of health units with transferred beds, within budgetary credits approved for this purpose
in local budgets.
Through the implementation of the decentralization process in the health sector was aimed
at ensuring compliance with the principles of equity, quality, accountability and patient
centeredness in health services system. The transfer of hospitals’ administration to county councils
or local councils has advantages and disadvantages. Involving more public budgets in health
financing may result in dilution of responsibility, and much more difficult control in achievement of
the flows of formation, distribution and use of public funds with negative effects on public finances
as a whole.
The research carried shows that the evolution and structure of health expenditure financed
from local budgets is determined with the legislative framework in the field and by several variables
that differs from one territorial administrative unit to another: the existence of sanitary units, such
0.5 0.6
1.1
1.71
2.15 2.13 2.17
2.4 2.56
0
0.5
1
1.5
2
2.5
3
2007 2008 2009 2010 2011 2012 2013 2014 2015
Year
Share (%)
The share of health spending in total expenditures of local budgets over the period 2007-2015
as these, involving local authorities in development and modernization of their number and social
structure of the population. Over the post-revolutionary period we identified three stages in
evolution of the share of health spending in total expenditures of local budgets, as follows:
a. between 1990-1997, this type of expenditure held a relatively high share of total
expenditure financed by local budgets (about 15%);
b. between 1998-2006, there was a significant decline in the share of public health
expenditure in total local budget expenditures (about 0.5%);
c. from 2007 onwards there has been an increase in the share of public health expenditure in
total local budget expenditures due to the transfer of hospitals’ administration from the Ministry of
Health to the county councils or local councils, transfer which was regulated in 2006.
Over the period 2007-2015, there was a tendency to increase this percentage to 2.56% which
shows that local authorities directed significant amounts of local budgets to health financing. We
believe that this upward trend will continue in coming years.
ENDNOTES
1 Law no. 95/2006 on healthcare reform, published in the Official Monitor of Romania, Part I, no. 372 of
April 28, 2006 and GEO 48/2010 amending and supplementing certain acts in decentralizing health, published in the
Official Monitor, Part I no. 384 of June 10, 2010;
2 Art. 4 of Government Ordinance no. 70/2002 on administration of public medical units of local and county
interest, published in the Official Monitor No. 648 of August 31, 2002 approved by Law no. 99/2004;
3 Government Ordinance no. 70/2002 on administration of public medical units of local and county interest,
published in the Official Monitor no. 648 of August 31, 2002
BIBLIOGRAPHY
1. Filip Gheorghe, Public finances, Junimea Publishing House, Iaşi, 2002;
2. Ichim Cristinel, A new approach regarding the expenses in local budgets for public
authorities, Annals of the „Constantin Brâncuşi” University of Târgu Jiu, Economy Series, ISSN
1844– 7007, Vol. 1/2013 (Februarie 2013),
3. Oprea Florin, Cigu Elena, Local public finances, C. H. Beck Publishing House,
Bucharest, 2013;
4. Popeangă Gabriel, The Management of local public finances, Expert Publishing House,
Bucharest, 2002;
5. *** Law no. 95/2006 on healthcare reform, published in the Official Monitor of Romania,
Part I, no. 372 of April 28, 2006 and GEO 48/2010 amending and supplementing certain acts in
decentralizing health, published in the Official Monitor, Part I no. 384 of 10 June 2010v
6. *** Government Ordinance no. 70/2002 on administration of public medical units of
local and county interest, published in the Official Monitor no. 648 of August 31, 2002 approved by
Law no. 99/2004
7. *** O.U.G. no. 63/2010 amending and supplementing Law no. 273/2006 on local public
finances and to establish financial measures, published in the Official Monitor no. 450 of July 2,
2010, art. I, para. 6, approved with amendments by Law no. 13/2011, published in the Official
Monitor no. 179 of March 14, 2011
8. *** Statistical Yearbook 1994-2016.
PhD Tatiana Manolievna GORDITSA
University of State Fiscal Service of Ukraine (Educational-Scientific Institute in Storoginets, Chernivtsi Region), Ukraine
Abstract:
The article deals with the author's conceptual approach to the multiple scientific concepts of both
traditional and universal banking service moreover it shows the level of transformation of the latter to the model of the
finance supermarket – the top of the modern retail banking, a structure that was formed due to globalization of the
finance-credit industry.
The article analyses the category of “finance supermarket” and brings out a common idea considering the main
features of the mentioned organization model of banking service. The main features include:
1. Complex banking service satisfying the customers` needs;
2. The Bundling of banking and financial products (services);
3. Product line extension, standardization and large scale character of sale;
4. Remote banking.
Bundling of the products (services) introduced in this model allows the maximal integration of the finance services,
operations and products including banking, consulting, insurance, investment services at the same office.
Analysis of the scientific literature shows that the organization structure of the servicing in a Ukrainian universal bank
mostly associates the model of a finance supermarket. However, current restrictions of the Ukrainian legal system and
the existence of the certain transition level, caused by gradual application of the innovations of both financial and
technological origin (evolutionary-innovative development) are not taken into account. Looking from this angle, the
author describes a transition model – from a universal bank to a financial supermarket, a universal banking
supermarket. The model`s distinctive feature is the application of the improved technological service, that induced the
transformation of modern banking operations, services and products in Ukraine from simplest to complex.
Key words: retail banking, customer, remote banking, universal bank, financial supermarket, universal banking
supermarket
JEL classification: G21
1. INTRODUCTION
The specifics of the evolutionary-innovative development of retail banking in Ukraine tend
to lower the impact of the pricing policy (banking tariffs increase or decrease) due to hostile
competitive environment. Suitability of the product line to the today`s customers` needs along with
the improved quality of service combined with the bonus features provided as co-branding products
together with car retailers, travel, insurance and real estate agencies etc. should be considered as
the most influential in attracting the customer.
Practice shows that there is a range of fundamental transformations, which influenced the
development of retail banking resulting in two main approaches – traditional and universal. The
author`s comparison characteristics of the modern traditional banking and universal banking applied
to retail banking service is presented in the table (table no. 1) (Gorditsa, 2012, p. 281-282) [7]:
Table no. 1. Comparison characteristics of the traditional and universal banks Criteria Traditional banking Universal banking
1 2 3
Client -
Household
Personal approach Complex approach (both personal and mass): mass
banking, family banking, рrivate banking, VIP banking
Products Products are not often grouped according
to the needs of certain client groups (based
on income, age etc.), although they have
standardized features
Bundling of the standardized products for mass
banking, private banking, family banking, personal and
exclusive offers for private banking, VIP banking
1 2 3
Information Mass character of both applicable and
non-applicable information
Mass banking, family banking, private banking –
specified information delivered by innovative
technologies like remote banking; VIP banking –
similar approach with additional private
consultations
Contact with
manager
Limited by working hours Mass banking, private banking, family banking -
limited by working hours; VIP banking – unlimited
Cost Standard conditions, occasionally for
private banking – personal approach
Mass banking – standard conditions, private banking,
family banking - standard conditions with an
personal approach; VIP banking – solely personal
approach
Location Customer servicing depends on the
location of the bank
Customer servicing Service is not affected by the
bank`s location
For the purpose of the further research of the specifics of the universal bank model in
Ukraine, the following points should be considered.
2. ANALYSIS 0F SCIENTIFIC INTERPRETATION OF THE CATEGORY
“FINANCE SUPERMARKET”
Recent studies show that the organization structure of the servicing in a Ukrainian universal
bank is often associated with a finance supermarket model. But, recent publications lack a sole
opinion on systematization of the organization of a retail banking in the form of finance
supermarket, as authors share variegated views on the matter (table no. 2):
Table no. 2. Scientific interpretations of an economic category “finance supermarket” Author Scientific interpretation
1 2
(Goloshchapova, 2006)
Finance supermarket should be interpreted as a organization form of
complex retail banking, efficiently satisfying the clients` needs in finance
service provided directly by bank or other financial institutions for whom the
bank acts as a partner [5].
(Dyeyeva, 2012, p. 7)
Finance supermarket is the highest rate of integration policy and business
operations, characterized by an ability of cooperative use of clients
databases, provision of universal finance service and fully integrated
products [8].
(Zhyhadlo, 2012, p. 44-45) A classic finance supermarket is a structure providing a wide range of
banking, insurance and investment services to a customer under one
trademark at the same place [9].
(Zvarykina, 2010, p.14)
Universal bank as a finance supermarket offers a bundle of banking services
as a substantially designed innovative banking product ready for sale, whose
qualitative and quantitative features are reflected in an agreement between
bank and customer, promotional, methodological and other documents [10].
(Kanaev, 2008, p.28)
Finance supermarket is a modern business model, founded on
conglomeration, representing a complex organizational process. Activity of a
finance supermarket consists of standardization and service efficiency,
namely the highest level of service automation and commoditization of
banking products and services. That is why a finance supermarket may be
organized as one of the structures of a conglomeration or a brokerage firm,
trading other organizations` products. A product line extension is
accomplished through other organizations` products oriented on mass
customer [11].
(Meshcheryakov, 2010, p.23)
Finance supermarket is a organization form of complex service, providing
fully satisfying the сustomer needs in financial services [13].
(Prikaznyuk, 2008, p. 30-32)
Finance supermarket is indeed a nearly full cooperation of a bank and an
insurance company inside the same holding, characterized by merger
including property [15].
1 2
(Sviridov, 2009, p. 39-40)
Finance supermarket as an integrated finance group emerged under cooperation of
banks with other organizations, development of networks branch and remote
banking, specializing on complex service. Finance supermarkets may be viewed
as integrated centers of risk-management. Finance supermarket is a model of a
customer-oriented, representing a unified access channel from customer to
finance services [16].
(Stakhnyuk, 2011, p.10) Finance supermarkets are major global banks, organizing making of complex
products [17].
(Sukhushina, 2004) Business model of a finance supermarket is based on a banking institution.
Whose development, from one side is supposed to be headed towards financial
instruments line extension, and from the other towards activation of retail
banking, where a big potential of ‘not working’ cash savings that may be used as
investment may be found. Business model of a finance supermarket is the most
acceptable development plan for small and middle banks, their essential
capitalization growth and preservation of a competitive position in today`s
financial market [18].
Analysis of scientific interpretations of the category “finance supermarket’ (table 1) points
out that the organization structure of a finance supermarket is usually considered in general, where
the bank acts like a universal financial institution that provides certain services line in order to fully
satisfy the сustomer need in financial service (Zhyhadlo, I. V. (2012); Zvarykina, O.B. (2010),
Meshcheryakov, G.U. (2010) [9] - [10] - [13]. However, scientists like Goloshchapova, Y.V.
(2006), Dyeyeva, N.E. (2012), Kanaev, A. V. (2008), Prikaznyuk, N. (2008) consider finance
supermarket as a organization form of retail banking achieved through integration with other
organizations [5] - [8] - [11] – [15]. Viewed from this angle, Sviridov, O.U. (2009) besides
integration, highlights the importance of development of networks branch and remote banking [16].
On the other hand Sukhushina, G.V. (2004) insists that business model of a finance supermarket is
more convenient for small and middle banks [18], and on the contrary Stakhnyuk, A.V. (2011)
states the same for major global banks [17]. It is relevant to note that Goncharuk, A.S. (2012, p. 20)
defines the organization form of retail banking through establishing the so called “banking centers”,
whose activity is oriented towards providing both banking and financial services, and also towards
consulting for customer, promotion of government programs in the sphere of mortgage crediting
and agriculture development (private farming etc.) [6].
Thus, analysis of different interpretations of the category “finance supermarket” shows that there is
a consensus concerning the main features of such organization of banking service:
1. Complex banking service satisfying the customers` needs;
2. Bundling of the products (services), moreover the complex products (services) contains both
banking and financial products (services);
3. Product line extension, standardization and large scale character of sale;
4. Remote banking.
Exactly the bundling of the products (services) introduced in this model is characterized by
combination of the maximal product line of financial services, operations and products, including
banking, consulting, insurance and investment services at the same office in order to simplify the
procedure of the banking service. On the other hand, the approach of identifying a universal bank
with a model of a finance supermarket does not take into account current restrictions of Ukrainian
legal system and the existence of the certain transition level, caused by gradual application of the
innovations of both financial and technological origin based on evolutionary-innovative
development of the financial&credit industry. Let us examine this approach in detail.
3. DEVELOPMENT MODEL UNIVERSAL BANKING SUPERMARKET (BY
EXAMPLE RETAIL BANKING)
Law experts agree that “banking activity should be considered as a systematic business
activity implemented by making banking transaction deals and operations” (Bezklubyy, 2006, p.
14) [1]. Business activity divides to a licensed activity, which is regulated by the Law of Ukraine
“On banks and banking activity”[19], precisely “provision of financial services to household and
legal entities by finding and placing bankroll along with performing вanking operations of cash
payment, securities, currency and other banking operations in order to make profit”(Bezklubyy,
Bankivsʹki pravochyny: tsyvilʹno-pravovi problemy: monohrafiya, 2005, p.39) [2] and non-licensed,
which means that provision of financial and other services to houshold and legal entities without
performing any banking operations. That is what divides, in certain way, banking and financial
activities, while the former is a constituent of the latter.
In this case, financial, technological and organizational integration takes place, which leads
to growth of various innovative potential in retail banking. Thus, the legal approach, along with
recent practice prove, that besides the approach presented in table 1, retail banking by the system of
a universal bank may be presented in the following sequence:
1. Solely banking services, products and operations that accord to licensed banking activity
as well as other financial services additionally that accompany or supplement their;
2. New technologies in banking (personal, family and mass banking) along with
implantation of remote banking).
That is why bank as a sole management center must provide various functions like strategy
choice, planning mechanism design, methodology, education along with analytics and control in
retail banking. According to Goncharuk, A.S. (2012) «…development of modern retail banking
happens by vertical and horizontal universalization. In first case – in retail business banks offer
traditional deposit-credit, cash payment and transfer services for retail custome. In second case –
untraditional for banking practice financial services like insurance, retirement saving, retail
investment, etc. are offered to retail customer» (Goncharuk, 2012, p.29) [6]. In that sense it is
relevant to cite a well-known model of a “universal banking” introduced by Doerig H.U., that
covers traditional banking business, investment banking, retail banking, insurance business, trusting
as a logical extension of M. Porter`s focus strategy. Porter emphasizes market niche strategy,
Doerig shows that strong sides of a bank are the base for focusing, however, both strategies are
based on the principle of concentration on the key benefits. According to Doerig, retail business is
one of the basics of so-called focusing, based on universal financial services and personal customer.
Researchers Bochkarev, S. V. and Pochykovskaya E.A. (2009) who study the problem, prove that
universalization strategy inside a particular economy sector of a finance-credit industry, retail sector
in our case, is horizontal, and vertical is a universalization strategy characterized by consolidation
of different industries. Let us point out that they are also categorized separately according to the
format of connections between the financial&credit industry and non-financial industries into
homogeneous or internal and heterogeneous or external (Bochkarev and Pochykovskaya, 2009) [4].
Thus, the universal bank model represents a combined universalization strategy based on the
solidarity of both horizontal and vertical strategies. Due to the fact that the cited authors propose to
define the connection between the financial industry as a heterogeneous and that inside a particular
of financial&credit industry as a homogeneous, we distinguish two kinds of diversification,
consolidation and integration: internal homogeneous and external heterogeneous. Moreover, we
suggest distinguishing two kinds of universalization strategy – horizontal and vertical. Horizontal
inquires a universalization strategy focused on consolidation of homogeneous industy, vertical
strategy is focused on different industy. Thus, figuring out a bank strategy focused on
universalization must be foremost based on homogeneous diversification, internal segmentation,
i.e., division of the whole sector into segments and subsegments.
Regarding the heterogeneous strategy, Kanaev, A. V. (2008) supposes that complex external
(heterogeneous) processes of bank universalization “occur inside the bancassurance and
assurfinance models of financial conglomerates fusing banks and insurance companies” (Kanaev,
2008, p.28) [11]. In opposition to the statement, where the fusion is given the form of a financial
conglomerate, authors like Bochkarev, S. V. and Pochykovskaya E.A. (2009) do not consider
those connections to be conglomerate, basing on their classification of diversification, consolidation
and integration forms (Bochkarev and Pochykovskaya, 2009) [4].
Therefore, those groups only have the form of a regular universal bank. So, in the first case
(bancassurance), organization can be described in the following way: a financial conglomerate is
headed by a bank basing on implementation of cross-selling, i.e., insurance products are sold
through the branches of the bank. In the second case (assurfinance), organization is headed by an
insurance company and realizes banking products. But the Ukrainian practice only proves the
existence of the first universalization model (Kremen', 2009, p.8) [12]. Furthermore, the type of
universal banking group covering banking, investment and insurance business (allfinanz) is superior
(for now) in development and suits in the organization form a financial conglomerate. From this
angle a complex financial service of households concept, introduced by Sukhushina, G.V. (2004),
concluding that universalization and diversification of banking activity are based on organizational
and technological integration of financial institutions and on bundling of financial products, appears
to be rational [18].
This position is not possible without cooperation of joint development programs of products
and services. In this case banks become financial, information and communication centers,
accumulating not only capital, but information resources as well and providing development of
cooperative specialized programs to every partner through various marketing tools of co-branding.
In addition, Dyeyev`s N.E. opinion, considering a finance supermarket as “a highest form of
integration of policy and business-operations. This approach is based on the ability of cooperative
use of client databases, provision of universal financial services and fully integrated products” is
also relevant (Dyeyeva, 2012, p. 7) [8].
In any case financial institutions, banks and insurance companies etc. are only mediators,
providing the product to the customer in order to satisfy his particular needs and make certain
profit. Purpose of that cooperation is firstly – increase of capitalization level of financial
institutions, secondly – risk distribution, thirdly – product line extension and finally – reduction of
promotional and marketing costs due to development of co-branding. Thus, product line of a
finance supermarket under the auspices of co-branding can service retail customer in following
aspects:
a) Basic banking products, services, operations: cash payment and transfer without servicing a bank
account, with servicing the bank account or credit card account, including money transfers and
currency exchange, safing (safing deposit boxes), credit and deposit programs;
b) Basic insurance services that accompany basic banking products: life-assurance for drivers,
insurance of realty, insurance of third party liability;
c) Investment services: personal trust management, management of retirement savings, etc.;
d) Consulting services: legal and tax services, etc.
However, practice reveals that modern complex banking products and services based on
bundling mechanism, already containing various payments of retail customer assemble the so-called
“payment-service” with remote banking, which refers to the next level of modern universalization,
like we mentioned before, that makes the bank a certain technological center. It`s important to note
that there is a certain equivocality in interpretation of complex and structured banking services and
products. For instance, Pantêlêêva, N.M. (2011) defines a payment system – a deposit-credit card as
a structured product [14].
In our opinion, the cited definition is not correct as both of the products are of the same
industry – the banking industry and it is no more than a complex of operations, that is based on a
system of mutual trust, while hybrid or structured (different structures) products are related to a
combination of a licensed and non-licensed (partnered) banking activity. The so-called investment
deposit may be referred to as a structured product. It received recognition in the countries with
developed economies and gives an opportunity to make profit in the form of annual interest on the
deposit account and from investing to stock market instruments (stocks and bonds).
The only thing that combines the approach of creating a complex and structured product is
the principle of product bundling, which reduces the cost of offer. The importance of utilization of
such complex product like a payment card and a system of multichannel E-banking (remote
banking), allocates the following feature of implementation of the concept of a finance supermarket,
as the highest level of organization implying that complex retail banking obtains the characteristics
of informational-financial service defined in information economy as “an innovation model of
provision banking services based on informational-network customer service” (Bodnar, 2012, p. 3)
[3]. Thus, the transition model from a universal bank to a financial supermarket becomes a
universal banking supermarket, whose main feature is improved technological service (Figure no.
1).
Figure no. 1. Development model of retail banking in Ukraine (designed by author)
4. CONCLUSIONS
The research revealed that service mechanism based on organization system of a modern
Ukrainian universal bank is usually associated with a model of finance supermarket, without
considering restrictions of Ukrainian legal system and existence of a certain transition level
resulted by gradual application of innovations of financial and technological origin. Looking from
this angle, the author described a transition model – from a universal bank to a financial
supermarket, a universal banking supermarket, whose distinctive feature is the application of the
improved technological service.
So, the modern models of remote banking (E-banking and it`s logical extension – Internet-
Banking) introduce the opportunities for bank`s competitive advantages, resulting in development
of modern payment system. As a result, the product policy acquires new opportunities considering
improvement of traditional banking products, operations and services and implementation of new
financial services (investment, insurance, brokerage, trusting, etc.), that may accompany the
banking products or come as separate offers. Thus, infiltration of information technologies over the
past 30-40 years into industries of modern business and consequently over the last few years in
Universal retail
banking
Transition model -
universal retail
banking
supermarket
Financial
supermarket
Effect o
f finan
cial inn
ov
ation
s
Effect o
f techn
olo
gical in
nov
ation
s
Effect o
f finan
cial inn
ov
ation
s
Traditional retail
banking
Ukraine defines the need of implantation of the most recent technologies in order to improve
banking service.
Even today, aforementioned technologies induced the transformation of modern banking
operations, services and products in Ukraine from simplest to complex, giving us the right to state
that a ordinary universal bank in certain degree level of a universal banking supermarket due to
implementation of innovative technological processes and in perspective should achieve the level of
a finance supermarket – a structure formed as a result of globalization in sphere of financial&credit
industry combining a maximal spectrum of financial services, operations and products (banking,
consulting, insurance, investment) in order to simplify the procedure of banking service and save
the time of customer` and managers.
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Teaching Associate PhD Anca Florentina GAVRILUŢĂ (VATAMANU)
Department of Finance, Money and Public Administration "Аlеxаndru Ioаn Cuzа" University of Iаși, Romаniа
gavriluta.anca@yаhoo.com
Abstract:
In the last decades, against the background experience of countries which have known consecutive periods of
fiscal instability, place all more often the problem of consolidating public finances and establish a sustainable and
stable fiscal policies that respect fiscal responsibility criteria. Government decisions have a role well determined in
critical periods of the economy and their approach with the purpose of putting in practice, dictate the future of entire
generations. A way to counteract negative effects of the crisis and of the various factors that affecting the economy, is
undoubtedly the increase of domestic supply. But in business reform process, it is also necessary to take into account a
good instrumentation of fiscal budgetary policy, imposing the need to provide particular attention to the mechanisms of
public finances and the specific instruments (expenditure, budget, revenue, public debt). The aim of this paper is to show the degree of compliance with the principles of fiscal responsibility,
emphasizing which is the degree of convergence on fiscal responsibility. The methodology used is qualitative, which
concerns the analysis on the contents of a series key documents: Statute of fiscal rules in the EU member states 28, the
origin of fiscal rules and corroboration with specific elements of the public administration system, all this documents,
enabling to build a index which validates the hypothesis of this research.
Key words: fiscal responsibility, fiscal rules, public administration
JEL classification: G28, E62, H72
1. INTRODUCTION
In contemporaneity, the state is an important player in both the political, social and
economic life. Under the aspect of the sustainability of the action taken, it is conditioned for the
procurement of resources, using one of the levers, among which we find the fiscal system. In light
of its status as a provider of public goods and thus the public service provider, the state enjoys
legitimacy in order to obtain financing from the beneficiaries concerned. This legitimacy is
exercised by government revenue policy, but always there is a need for interdependence between
resource requirements and implications of state government in providing public goods and services.
Even if the fiscality is a concept deeply annoyed on the grounds of exaggerations in some cases,
however, we admit the importance in strengthening social equity, supporting disadvantaged social
categories and implicitly, in supporting economic development. In fact, from a historically point o
view, tax systems have evolved in terms of delimitation of oportun situation, with the aim of the
collection of taxs and fees in a manner as simplified with the effect of a tolerance as the positive tax
payers and with a functionality in the basis of principles well defined. Sure that in the optimum
management of public finances and the mechanisms concerned, we find emphasized the usefulness
of the consolidation of fiscal and budgetary discipline, with the purpose to enhancing the
transparency in the management of financial resources, thus laying the foundations for what means
the fiscal and budgetary responsibility.
In fact, the responsibility, implies not only a transparency of the use of public finance
mechanisms but also a more efficient by a legal framework well determined. On the other hand, this
need of responsibility, makes its presence felt as a result of the economic crisis, which has made
that the aspects who were previously inserted in the legislation of the ordinary meeting, to migrate
in the constitutional space and as a result of the implications of the bodies from international level,
the European Union, bringing like recommendation Member States a series of measures regarding
the fiscal responsibility.
2. LITERATURE REVIEW
In the itinerary of the Governments to achieving the objectives of economic and social
activity, shall emphasize the use of regulations and the configuration of the institutions in the
direction of an application as well as more efficient use of the fiscal instruments (Dumitru Sorescu,
Jean-Marie, 2008). Discussions about the taxation and by default, about the level of taxation, are
traveling around the principles which involve morality, with the incidence of issues such as social
justice, the size of the duties, division of duties, equality of sacrifice or transparent taxation. In this
way, recognizing the scope of fiscal responsibility laws, (Manmohan S. Kumar, Teresa T., (2007),
relate that FRLs aim to improve fiscal discipline by requiring governments to declare and commit to
a monitorable fiscal policy objective and strategy. Often, a driving force behind FRLs is the wish to
make fiscal policies more predictable and credible, by establishing rules and procedures the
government must follow in the design and implementation of fiscal policy, and by setting up
transparent mechanisms by wich others can judge if the government is complying with established
goals and priorities.
Murray Rothbard (1981) come with an argument according to which, "economists can not
take any principle of fair taxation because taxation by its nature is unjust”. Moreover, social justice,
reason under which taxation is often justified, tends to approach a concept that is interdependent
with an opinion of a researcher in the field, "human behavior can only be called just or unjust"
(Hayek 2015). Through this statement of the boundary of morality in decisions concerning taxation
and implicitly, the level of taxation, we can judge that it is impossible for us to imagine that we can
conceive a system of taxation which would correspond to the attribute of "justice" (Saline , 2015).
Taxation, a phenomenon that in the minds of JB Say is reported like " action to take a part of
the property to fulfill the public purpose" can be regarded as a form of violation of property rights.
In contrary to this last opinion, Frederic Bastiat, does not consider that taxation would affect
property rights, as long as the use of these revenues is done in order to subsidize unprofitable
activities and ensuring social equity. Adam Smith (1776), considers that the amount of taxes owed
by taxpayers, must "be certain, not arbitrary" and this certainty of taxation, should not leave plece
for interpretation, but to emphasize to taxpayer very clearly the entire itinerary process. In light of
the reference to the fiscal responsibility with a clear demarcation between fiscal policy, regarded as
all decisions on taxation area, that the state adopt to ensure financial resources necessary financing
activities (Musgrave, 1984; Pedregal and Perez, 2009) and budgetary policy, whose main
instrument budget and its components (Annicchiarico, 2012), we emphasize that based on the
quality of member state of the European Union, Romania, was faced with the responsibility of
strengthening fiscal responsibility by creating a well defined legal framework.
Why should a country to adopt a fiscal responsibility law? Because the efficient
management of public finance and implicitly strengthening a set of rules under which the
Government to ensure a correct management of fiscal and budgetary policy, can not be a success
without the existence of a solid legal framework. The international level researchers (Corbacho and
Schwartz, 2007), argue against this, reporting that a law who outlining fiscal responsibility, can not
buy credibility of citizens in efficiency of public administration. In this context, researchers from
the Department for International Development (DFID, Carlos Santiso, 2005) highlights the
importance of an administration in which is necessary to preserve fiscal and budgetary discipline,
telling that "political institutions and institutional arrangements have a decisive influence on
economic performance and fiscal responsibility, only an administration that has fiscal responsibility
as the basis of a public finance transparency, strengthens confidence of taxpayers in public
management”.
We realise that it is well known that political institutions affect the budget processes and
fiscal outcomes (Alesina and Perotti 1996 and 1995; Acosta and Coppedge 2001). Research by
Ernesto Stein et al (1998) and Alberto Alesina et al (1999), have significantly increased our
understanding regarding the influence of budgetary institutions on fiscal discipline. So through the
approach of fiscal responsibility by an international organization that has direct implications on the
promotion of a global health economics (IMF) we find that in order to achieve the goal of fiscal
responsibility, it is necessary to insert a set of relevant rules, necessary to outlining this concept.
3. DATA AND METODOLOGY
It is evident from the literature review section that the subject addressed in this research, is
innovative, and we want to incorporate the results of the qualitative analysis in an efficient way,
with the purpose of providing an answer to the main question of this study: Fiscal responsibility is
a primary goal of the contemporary world, which is the degree of convergence to fiscal
responsibility in EU countries?
Research Hypothesis: The type, number and fiscal rules origin, enhance the image of an
administration that tends to respect the principles of fiscal and budgetary responsibility. According
with those mentioned, qualitative methodology will be sequential, involving a series of steps
depending on the specific subject tackled, who will provide viability of our study, coherence and
consistency.
1) Stage I: a content analysis of relevant documents from the framework of public finance in
general and fiscal budgetary responsibility in particular, in order to identify what is needed in the
second and the third stage of the study.
2) Stage II: incorporation of data obtained in the first stage, the process of encoding the types
of fiscal rules and their origin.
3) Stage III: The determinations of convergence score to Fiscal Responsibility Laws:
over 1.2-CONVERGENCE TO FR
less than 1.2-DO NOT
As we are interested in the phase difference between the components of the stages, we note
that the steps of study follows a logical sequence, because of the interdependence between them,
aiming in fact, obtain reliable results and truthful, to be able to certify the results obtained in this
qualitative approach. Through the deductive approach, we validate certainty the default choice of
group of countries in terms of budget rules and legal system origin. The limited resources available,
degree of difficulty and especially, the large volume of documents that need to be analyzed requires
primarily a exploratory study with the objective to make a innovative research. Therefore, in the
second stage of the study we made reference to the specific environment of the European Union
countries, but in the third stage, with the purpose to offering a clearer situation, encroaching EU 28
countries.
The technique used in this paper is represented by the study of the documents, which are
mainly two categories: the reports on public finances and fiscal sustainability. In base of
methodology raised in the previous paragraphs, the choice of conceptual content analysis has
become the only one able to confer the degree of objectivity necessary in the analysis, capable to
highlighting the issues that are significant for the situation analyzed.
Thus, the analysis was carried out in four distinct phases each having a precise set of criteria
and intermediate objectives. The four phases of analysis to be used are shown in Figure no. 1.
Figure no. 1. Main stages of study
Source: Own processing
In addition to content analysis of relevant documents from the public finances area in
general and fiscal budgetary responsibility in particular, in order to identify the necessary aspects
for the second and third stage of the study, we note that there was made a direct corellation with
the reference and methodology outlined in the first part of the study. Thus, we conclude that fiscal
policies and sustainable development policy, have appeared as major issues in media, politics and
public administration discussions among researchers in the field, beeing already an objective
whose involve work and the use of a multitude of variables, still missing unanimous opinion in this
sense.
By analyzing financial an fiscal reports from the internationally and nationally level,
referring to Romania's case, we find that fiscal-budgetary responsibility law no.69/2010, contains a
rule stipulated in article 6, letter d), which stipulate that "for each of the three years covered by the
fiscal bugetary strategy, the annual growth rate of total general government expenditure will be kept
under annual growth rate of nominal GDP forecast to budget year.
According to the OECD, a fiscal responsibility law, contain a set of rules, procedures and
principles that includes elements such as accountability, transparency and stability. In other words,
a law (or a part of a law) which aims to improve fiscal discipline by requiring governments to
declare and engage in a correct fiscal policy strategy.
Pointing the international context, we detail that fiscal responsibility is delimited by four main
characteristics (Pollitt, C. and G. Bouckaert, 2000):
Specifying the medium-term path of fiscal year,
Describe the medium and long term strategy of the annual budget and ways of meeting the
targets,
regular publication of reports (at least twice a year), in accordance with fiscal objectives and
targets,
Auditing annual financial statements, to ensure the integrity of fiscal information
Establish clear fiscal rules, transparent, consistent with economic reality
Table no. 1. Type of fiscal rules in place and type of economy Type of fiscal rules Type of economy
Country
-2014
ER:
Expendit
ure rule
RR:
Revenue
rule
BBR:
Budget
balance rule
DR: Debt
rule
Advance
d
Emerging Federal Member of
currency union
AT NO NO YES YES YES NO YES YES
BE - - YES YES YES NO YES YES
BG YES - YES YES NO YES NO NO
CZ YES - YES YES NO YES NO NO
CY - - YES YES YES NO NO YES
HR - - YES YES YES NO NO NO
DK YES - YES YES YES NO NO NO
EE - - YES YES YES NO NO YES
FI YES - YES YES YES NO NO YES
FR YES YES YES YES YES NO NO YES
DE YES - YES YES YES NO YES YES
EL YES - YES YES YES NO NO YES
IE - - YES YES NO YES NO NO
IT - - YES YES YES NO NO YES
LV - - YES YES YES NO NO YES
LT - - YES YES NO YES NO NO
LU YES YES YES YES NO YES NO NO
MT YES - YES YES YES NO NO YES
PL - - YES YES NO YES NO YES
PT YES YES YES YES YES NO NO YES
UK YES - YES YES NO YES NO NO
RO - - YES YES YES NO NO YES
SK YES - YES YES NO YES NO NO
SI - - YES YES YES NO NO YES
ES - - YES YES YES NO NO YES
SE YES - YES YES YES NO NO YES
NL YES - YES YES YES NO NO NO
HU - - YES YES YES NO NO NO
Source: own processing based on data provided by http://ec.europa.eu/economy
Tabel no. 2. Legal basis
Legal basis
Ţara-2014 ER RR BBR DR ER RR BBR DR
National rules Supranational rules
AT - - 3 - - - 4 4
BE - - - - - - 4 4
BG 3 - 3 3 - - 4 4
CZ - - - - - - 4 4
CY - - - - - - 4 4
HR 3 - 3 3 - - 4 4
DK 5 - 5 - - - 4 4
EE - - 2 - - - 4 4
FI 2 - 2 2 - - 4 4
FR 3 5 3 - - - 4 4
DE 1 - 5 - - - 4 4
EL - - 3 - - - 4 4
IE - - - - - - 4 4
IT - - 5 - - - 4 4
LV - - 5 - - - 4 4
LT 3 3 - 3 - - 4 4
LU 2 - - 2 - - 4 4
MT - - 5 - - - 4 4
PL 3 - - 5 - - 4 4
PT - - - - - - 4 4
UK - - 3 3 - - 4 4
RO - - 3 3 - - 4 4
SK - - 3 5 - - 4 4
SI - - - - - - 4 4
ES 3 - 3 - - - 4 4
SE 3 - 3 - - - 4 4
NL 2 2 3 - - - 4 4
HU - - - - - - 4 4
Source: own processing based on data provided by http://ec.europa.eu/economy http://ec.europa.eu/economy
*5: Constitutional; 4: International Treaty, 3: Common law; 2: Coalition agreement; 1: Political commitment.
4. RESULTS AND DEISCUSSIONS
Based on the above analyse, we can say that general topics of the analysis, require a
different treatment of the results obtained and we find that tax rules are effective in reducing
structural primary deficits at all levels of government efficiency. Basically, its clear that high levels
of debt, provoked by a situation of economic and financial crisis, constitute a major threat to the
financial sustainability of governments in many other parts of the world. This delicate state of
public finances also affects local governments and has led researchers to study the variables that
influence the volume of bank debt. However, few have specifically analysed the causes of
local government default, although it has provoked spending cutbacks and tax increases in many
countries. According to data from Table. 2.4 can be seen that in terms of the nature of the legal
system in eight states legal basis for fiscal rules have their origin in International Treaty and
Common Law, eight of them, in International Treaties, common Law and the Constitution, four of
them in International Treaties and the Constitution, other three in common law, the Constitution,
International treaties, and finally, two of the 28 member EU have the origin of budget rules in
originating Political Commitment and the Coalition Agreement, respectively, Germany and the
Netherlands.
Based on the frequency table (Table 3. Frequencies for type of fiscal rules), we can say
that in 28.57% of the EU states, the legal basis for fiscal rules is rooted in Common Law and
International Treaties, 28.57% in International Treaties, Common law and the Constitution, 14.29%
of them in International Treaties and the Constitution, 10.71% Common Law, Constitution and
International Treaty, 3.57% Political commitment, Constitution and the Treaty and the other 3.5%,
have the Coalition Agreement, Common Law and International Treaties.
Table no. 3. Frequencies for type of fiscal rules
Type of fiscal rules
Frequency Percent Valid Percent Cumulative Percent
Valid BBR AND DR 13 38.2 46.4 46.4
ER, BBR AND DR 12 35.3 42.9 89.3
ER, RR, BRR,DR 3 8.8 10.7 100.0
Total 28 82.4 100.0
Missing System 6 17.6
Total 34 100.0
Source: Author calculations in SPSS
According to data from Table. 3 we can see that of the 28 EU member states, 13 (46.43%)
have tax budget balance rules (BBR) and rules on public debt (DB), 12 (42,86% ) states have rules
tax on expenditure (ER), budget balance (BBR) and debt (DR) and 3 (10.71%) countries have rules
on expenditure (ER), revenue (RR) budget balance (BBR) and public debt (DR).
Table no. 4. The frequencies for type of economy Type of economy
Frequency Percent Valid Percent
Cumulative
Percent
Valid Advanced, Federal, Member
of currency union 3 8.8 10.7 10.7
Emerging 7 20.6 25.0 35.7
Advanced, Member of
currency union 13 38.2 46.4 82.1
Avanced 4 11.8 14.3 96.4
Emerging, Member of
currency union 1 2.9 3.6 100.0
Total 28 82.4 100.0
Missing System 6 17.6
Total 34 100.0
Source: Author calculations in SPSS
Based on Table 4. it notes that 13 of the 28 EU Member States, have an advanced economy
and there are members of the currency union, 7 have an emerging economy, three of them have an
advanced economy, there are federal and members of the Monetary Union, while a State has an
advanced economy and is a member of thecurrency union, thus:
46.43% of the 28 EU Member States, have an advanced and there are members of the
currency union,
25% have an emerging economy,
10.71% of them have an advanced economy, there are federal and part of Monetary Union
Member States,
3.57% of states have an advanced economy and there are part of currency union .
Table no. 5. Results of topics-The convergence to fiscal and budgetary responsibility
The convergence score to fiscal and budgetary responsibility
Ţara
Nr. Regulilor fiscale
0.25-1 p1
Importanta regulilor
fiscale 0.1-0.5 p2 Total
Scor de convergenţă (peste 1.2-converge la
RFB)
Austria 0.5 0.7 1.2 YES
Belgium 0.5 0.7 1.2 YES
Bulgaria 0.75 0.4 1.15 NO
Czech Republic 0.75 0.4 1.15 NO
Cyprus 0.5 0.4 0.9 NO
Croaţia 0.5 0.7 1.2 YES
Denmark 0.75 1.4 2.15 YES
Estonia 0.5 0.6 1.1 NO
Finland 0.75 0.6 1.35 YES
France 0.75 1.2 1.95 YES
Germany 0.75 1 1.75 YES
Greece 0.75 0.7 1.45 YES
Ireland 0.5 0.4 0.9 NO
Italy 0.5 0.9 1.4 YES
Latvia 0.5 0.9 1.4 YES
Lithuania 0.5 0.7 1.2 YES
Luxembourg 1 0.6 1.6 YES
Malta 0.75 0.9 1.65 YES
Polond 0.5 1.2 1.7 YES
Portugal 1 0.4 1.4 YES
United Kingdom 0.75 0.7 1.45 YES
România 0.5 0.7 1.2 YES
Slovak 0.75 1.2 1.95 YES
Slovenia 0.5 0.4 0.9 NO
Spain 0.5 0.7 1.2 YES
Sweden 0.75 0.7 1.45 YES
Netherlands 0.75 0.9 1.65 YES
Hungary 0.5 0.4 0.9 NO
Source: Own calculations
1 Depending on the type and number of fiscal rules according worksheet 1, it has been established a score of 0.25 for
each rule, the amount presented is their sum. 2 In terms of importance, with reference to the origin of fiscal rules-5: Constitutional; 4: International Treaty, 3:
Common Law; 2: Coalition Agreement 1: political commitment, it has been established a score equal to their sum
Table no. 6 show the importance of this study and presents the results of convergence on
fiscal budgetary responsibility, being clearly indicates specificity of 28 EU countries in terms of
accession or not to the fiscal responsibility and sustainable public finances. It is noted simplistic
that the results of our research are find in explanations of economic, noticing that the end results,
invokes we could say, aspects of economic long-term management, care for future generations and
countries capacity by managing fiscal reforms and not only.
5. CONCLUSIONS
Basically, the items of this analysis and correlation of different situations on the context of
the study, show that the economic future of nations and fiscal responsibility are directly corelated.
Content analysis showed that there is a link between budget deficits and benefits of tomorrow's
society, because the quality of management challenges short- and long-term, will help in putting
the nation on a path to sustainable prosperity and living standards rising. Thus, the research
concerned, wished by way of interdependence of actions undertaken and the mix of qualitative
methods to strengthen an overview in wath regards the opening of the European Union member
countries in adopting these fiscal rules and building a effective fiscal and budgetary system.
Concerns for greater transparency and accountability must nevertheless reinforce efforts at
promoting budget responsibility and anchoring fiscal discipline. Parliaments do possess a wide
range of budgetary powers, but often fail to exercise them effectively or responsibly. In most
emerging economies, they tend to lack both the technical capacities and the political incentives to
assume a responsible role in public finances. The study results lead to the conclusion that fiscal
responsibility represents the ideal of contemporary world, the way to strengthen the financial
system, to make it more solid, more efficient, more transparent and to meet the needs of current
generations without compromising those of future generations. Thus, building legislative fiscal
capacity is not only about restraining government, lengthening budget execution or sanctioning
financial management. It is also about improving financial management, stimulating efficiency
reforms, and promoting fiscal discipline.
In line with this, we admit that the study results find their basis in economic explanations,
appreciating that they invoke aspects of long-term economic management, caring for future
generations and countries capacity in managing fiscal reforms. We find a preference of inadequacy
of the legal fiscal mostly on profile of less developed countries with problems in terms of capacity
to effectively manage public finance system, talking concerned by Cyprus, Czech Republic,
Bulgaria, Slovenia, Hungary, which have scores below 1.2., and at the opposite pole, we discuss
about the scope of economic powerhouses, which, according to empirical studies, annual reports
and practices in the field, enjoys economic growth and a different status, respectively Danemmark,
Netherland, France, Luxembourg and Germany, which according to our analysis recorded scores
above 1.65, reaching a maximum of 2.15.
We consider that the study can be extended in the future, by inclusion of the score of
convergenc to fiscal responsibility, in an econometric study, to test the implications of this
convergence on economic growth, GDP growth rate being the dependent variable.
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Professor PhD Marian ZAHARIA
Faculty of Economic Studies, Petroleum-Gas University of Ploiești, Romania [email protected]
Associate Professor PhD Aniela BĂLĂCESCU
Faculty of Economic Sciences, "Constantin Brancuși" University of Târgu Jiu, Romania [email protected]
Abstract:
Economic and social developments in the period January 2000 - December 2013 both internally and externally
caused an evolution of ROBOR with significant increases or decreases. Their extent makes it difficult to build models
that can be used in the study and forecast of ROBOR. This paper analyzes the possibilities of describing the evolution of
ROBOR by autoregressive and moving average models. The analysis is based on three data sets: the first includes
ROBOR values the entire period; the second set includes data from January 2006 - December 2013 and the third
series, data from February 2009 - December 2013. Starting from these, six models are presented, three for the first
period, two for the second and one for third period.
Key words: time series, modeling, ARIMA, ROBOR
JEL classification: C15, C22, E4
1. INTRODUCTION
In the last decades, and especially after 1990, the process of globalization was characterized
by the modernization of economic, production development and global communications [15], but
also an “assembly increasingly integrated into which the roles of the member-nation remain
important, but where economic movements may not be reduced to international trade”[4]. On the
other hand, once with the outbreak of the economic crisis, the development disparities, materialized
by the overall average per capita income has increased [18], emphasizing inequalities, and
requiring the need to implement measures against the negative effects of globalization [14].
One way to study the financial and banking processes used in most of the above studies to
identify the effects of short-term and long-term decisions is a whole of techniques and methods
known as Box-Jenkings methodology [2]. Box and Jenkings have shown that they can obtain
proper operators to eliminate cyclical components. This methodology allows the elaboration and
analysis of dynamic models of stationary random processes (AR, MA, and ARMA) and
nonstationary (ARIMA and SARIMA). Also, important contributions to the study of economic
dynamics meet at Akaike [1], Mendes [10] and not least at Gandolfo [6].
In Romania, a well-founded presentation of the dynamic stochastic processes is provided by
Oprescu [12], which analyzes in detail the dynamics of the random component of time series, and
prediction and filtering mechanisms (Volta, Wiener, Kalman - initially analyzed in [13]), using
adaptive stochastic algorithms for estimation and prediction, together with economic applications
including a stochastic financial market model (the Black-Merton-Scholes model). Also among
Romanian contributions on the using of econometric models in the study of financial and banking
processes we mention those of Mutu [11] and Trancea [16],[17].
The study of the evolution of time series, especially of the banking and financial processes,
raises some difficulties, due to the multitude of factors that influence them, specialy during the
crisis [Buch], as well as high volatility that characterizes the phenomena and processes of the
banking and financial system. In these conditions, analysis of the evolution of specific indicators of
banking financial sector, as time series, is a useful and effective method. In this respect we
emphasize the works of Hytinen [9] and Dunis [5].
Based on these considerations, the paper presents a way of using ARIMA models to study
ROBOR (Romanian Interbank Offer Rate) evolution, in Romania, during 2000-2013
2. METHODOLOGICAL ISSUES
As specified by National Bank of Romania [8], ROBOR is calculated by mandated (i.e.
Reuters) as „the arithmetic average of the latest rates quoted by the each participants in fixing for
the RON deposits offered with 15 minutes before fixing, after rejecting extreme rates”. In other
words, ROBOR express the price at which a bank wants to provide liquidity.
For the analysis of the ROBOR and EURIBOR evolutions, were used time series published
by the European Commission and available on the EUROSTAT “Money market interest rates -
monthly data (irt_st_m)”[7]. The discrete values dependences, from statistical point of view, is
reflected in the links between successive observations of the series, leading to an analysis of the
series, based on empirical autocorrelation.
The dynamic model generally applicable to time series as realizations of random
processes tyt / , with set of time moments (continuous R or
discrete ZoriN ), is of the form:
tttt tyyfy ,...,, 21 (1)
where: t - is a random process, generally, as "white noise" ( 0tM and 2 tD ),
represented by the residuals ...fyt ,
Modeling of such processes is based on standalone applications of autoregressive models
(AR) and / or moving average (MA) or combinations thereof ARMA, ARIMA, etc.
Autoregressive models AR (p) are models which allow describing the evolution of a
stationary random process based on its previous values. A stationary series, Ztty
, follows a
process )( pAR if it is satisfied the condition:
Ztyyp
k
tktkt
,1
(2)
where 2,0~ Nt stationary series, 0tM , 22 tM , itit 0),cov( and p is
the number of past values of X that are considered to predict its current value.
Using the delay operator L (Lag) and noting with: pp LLLL 2
211 equation
(1) may be made in the form of: ttyL . Characteristic polynomial attached to the AR (p)
process is:
ppppP 2
21
1)( (3)
For 1p is obtained first-order autoregressive model AR(1): ttt yy 1 .
The process (2) is stationary if the absolute values of the roots of its characteristic
polynomial (3) are strictly less than 1.
In developing time series models, depending on how the process analyzed evolves, can
meet and other processes, such as moving average models MP(q), defined by the relation:
qtqttty 11 (4)
For 1q is obtained the moving average model )1(MA : 1 ttty
In practice, in most cases, do not meet the time series modeled by one of the two methods
described above, but combinations thereof. One of the models used in such situations, is ARMA
model, which combines both autoregressive lags of the dependent variable and the moving average
process. The mathematical expression of such model with p autoregressive terms, and q moving
average terms, denoted ARMA (p, q) is:
p
i
q
i
itititit yy1 1
0 (5)
For 1p and 1q is obtained the model ARMA(1,1) by the form
1110 tttt yy . (6)
The study of time series with autoregressive and moving average models are cases where
the roots of the characteristic polynomial of ARMA(p,q) models can take real or complex values
whose module can be greater than or equal to 1 case which occurs the phenomenon of non-
stationary. In such situations it is used ARIMA (p,d,q) model in which d is the order of
differentiation of the original time series. Usually, the values of d are 1 or 2. For 0d , the ARIMA
model is equivalent of ARMA model.
The analysis of data series have involve, in the first phase, the determination of indicators
such as average, median, standard deviation, skewness, kurtosis. Also were analyzed both the
seasonality of series, which in this study had a very small amplitude, as well as the stationary of
data series. For this, the roots of the characteristic equation were determined and, in cases where
1i was made the transformation ttt uyy 1 . The new series was checked themselves in terms
of stationary, stationary conditions being fulfilled.
Determination of the specification of ARIMA(p,d,q) and the estimation of the models
parameter were performed repetitively, taking account of the ACF and PACF functions, up to
getting some valid models and with statistically significant parameters.
Testing the validity of the model, and the statistical significance of coefficient values were
performed using a number of statistical tests (F-statistic, t-statistic, Wald, Akaike, the Durbin-
Watson and so on). Also have been studied the characteristics of series errors, analyzing the error
autocorrelation (Breusch-Godfrey Serial Correlation LM test), homoscedasticity / heteroscedasticity
(ARCH + LM test) and the distribution normality.
3. RESULTS AND DISCUSSION
During 2000 - 2013, ROBOR registered an trend with significant increases or decreases,
determined by economic policies adopted by the governments of this period, by the legislative
framework and its many transformations, by Romania's efforts for accession and integration to EU,
by the processes and the phenomena recorded in this period in European and global level, and, not
least, by the economic and financial crisis manifested in the last part of the period.
From the analysis of ROBOR evolution in January 2000 - December 2013 period [7],
resulted three autoregressive and moving average models, made by considering the series of the
data recorded in the whole period as well as in two most recent periods January 2006 - December
2013 respectively February 2009 - December 2013.
Both for the testing of the validity of the models, of the statistical significance of the
coefficients, as well as of various tests used for hypothesis testing, we chose a significance level
, 05.0 corresponding to 95% confidence level.
3.1. THE MODEL R_1
For this first model was used the data series corresponding to monthly averages values of
ROBOR for the period January 2000 - December 2013. For the stationary analysis of ROBOR_1
process was used Dickey-Fuller test whose results are shown in Figure no. 1. Given that the test
value (-4.652519) is less than all three critical values, result that the null hypothesis is rejected and,
therefore, the ROBOR_1 is stationary. This conclusion is underlined by the value of Prob.= 0.0002
<0.05, which corresponds to the usual significance level ( 05.0 ).
Figure no.1. Testing the stationarity of ROBOR_1 process
Source: Own elaboration using Eviews and data from http://appsso.eurostat.ec.europa.eu/nui/show.do?dataset=irt_st_m&lang=en
For the identification of the model corresponding to the ROBOR_1 process, as a result of
the analysis of the series ACF and PACF and using the Least Square Method, three models were
obtained (EQ01, EQ02, and EQ03) These fulfill the validity condition (F-statistic <0.05). Their
characteristics are shown in Figure no. 2.
Figure no.2. The characteristics of EQ01, EQ02 and EQ03 models
Source: Own elaboration using Eviews
To test the statistical significance of the values of coefficients we used the t-statistic. In the
case of EQ01 model, the constant C = 3.790139 is not statistically significant ( 05.04202.0Pr ob )
and, in these circumstances, can not be taken into account. The coefficient MA(2) = -0.25740
although it is statistically significant for significance level 1.0 does not meet the condition
imposed in this study specified above ( 05.0 ). The other coefficients satisfy the conditions
imposed.
In the case of EQ02 model, for significance level 1.0 , both the constant C and the all
coefficients are statistically significant. The model can be considered for a probability of 90%.
Note that the number of iterations until convergence is 25 compared to 13 in the case of the EQ01.
On the other hand, taking into account the values of Akaike info criterion and Schwaez criterion,
the model EQ02 is better (more efficient) than the model EQ01.
Taking into account the results obtained was tested a third model (EQ03). In the case of its
both the constant coefficients C and AR (2) and MA (3) satisfy the conditions imposed in this
study and, therefore, they are statistically significant for a probability even higher than 95%.
Although the R-squared = 0.964680 is lower than the other two models the values of Akaike info
criterion (4.683661) and Schwarz criterion (4.739902) certifies the superiority of this model to the
other. Consequently for the data series ROBOR_1, R_1 model is given by EQ03 and is a model
ARMA(2,3):
tt
tt
LuL
uy
32 529587.0187004.01
666173.9
(7)
respectively
32 529587.087004.0256215.1 tttt yy (8)
The application of the tests on homoscedasticity and autocorrelation of errors, reject the null
hypothesis indicating both the existence of heteroscedasticity and of the presence of serial
correlation. Therefore, the model R_1 should be used with cautions.
3.2. THE MODEL R_2
For this model was used data series corresponding to the monthly average values of
ROBOR from January 2006 - December 2013. The data series was named ROBOR6. For the
stationarity analysis was used Dickey-Fuller test. Since the t-statistic was greater than any of the
critical values, the null hypothesis is accepted. ROBOR6 process is non-stationary.
To get from ROBOR6 a stationary series, its first difference was determined by the
relationship:
)1(666 roborrobordrobor (9)
Obtained series called DROBOR6 is stationary as Augmented Dickey-Fuller value test (-
8.871059), lower than any of the critical values, the value of Prob, corresponding to this, being 0.
For the DROBOR6 data series, two models have been identified (figure no. 3). Both models
are valid. Also, all their coefficients are statistically significant (all P values are much lower than
significance level).
Given the values of Akaike info criterion (2.416891, EQ04 model, respectively 2.268298,
EQ5 model) and the Schwarz criterion (2.565768, EQ04 model, respectively 2.384869, EQ5
model) model R_2 can be made from the model EQ04. It should be noted also that while the model
EQ04 value of Durbin-Watson test is d = 1.824579 for 43.2;78.1,05.0 d , resulting in the
acceptance the null hypothesis (no errors autocorrelation) for EQ05 model, Durbin-Watson test is
inconclusive.
Figure no. 3. The characteristics of EQ04 and EQ05 models
Source: Own elaboration using Eviews
To test the error autocorrelation for EQ04 model (figure no. 4) was used Breusch-Godfrey
test. Since the probability values corresponding to 746313.0 statisticF and
262099.1 squaredObsR are greater than significance level 05.0 , the null hypothesis is
accepted and there is therefore no serial correlation.
Figure no. 4. Residual tests for EQ04
Source: Own elaboration using Eviews
To test homoscedasticity / heteroscedasticity, was used ARCH test (autoregressive
conditional heteroscedasticity). Since, in this case, the .Pr ob values corresponding to the values of
244833.3 statisticF and 194496.3 squaredObsR are greater than significance level 05.0 ,
the null hypothesis is accepted and therefore the variances of the residues do not differ significantly
(homoscedasticity hypothesis is accepted).
For DROBOR6 data series, the chosen model is ARIMA(15,1,12). The R_2 is obtained
from EQ04:
tt
ttt
LLLduLL
yydu
1262156
1
668686.01603227.11037428.01098073.01873194.01
(10)
respectively:
121814128
622221
1615761
401248.0072554.1025027.0668686.0600055.0
603227.1037428.0085673.0085673.0
098073.0098073.0873914.0873914.0
ttttt
ttttt
tttttt
yy
yyyyyy
3.3. THE MODEL R_2
R_3 model was developed based on corresponding to data series of the monthly averages
values of ROBOR for the period February 2009 - December 2013. The data series was named
ROBOR9. For stationarity analysis of the process was used Dickey-Fuller test whose results are
presented in Table 6. For 05.0 significance level the value of t-statistic (-3.390803) is less than
the critical value -2.913549 (5% level) and therefore the null hypothesis is rejected and the
alternative hypothesis is accepted. ROBOR9 process is stationary.
Figure no. 5. Testing ROBOR9 stationarity and identification the model EQ06
Source: Own elaboration using Eviews
For ROBOR9 process was chosen only one model, EQ06 (figure no. 5). Given that Prob (F-
statistic) = 0.000 resulting model is valid. Also, because both for the constant C and for the
coefficients AR (1), MA (1), MA (3) and MA (4), 0000.0.Pr ob result that they are statistically
significant.
The results of testing the series of residues (RESID01) EQ06 for the model are shown in
Figure no.6. After Breusch-Godfrey test application resulted that for 681106.0 statisticF and
231775.1 squaredObsR the values 5106.0.Pr ob and 540161.0.Pr ob , respectively, are much
higher than significance threshold 05.0 , and in conclusion, we accept the null hypothesis: there
is no serial correlation.
The results of ARCH test are shown in Table 7b. Since, , the .Pr ob values corresponding to
the values of 513485.1 statisticF and 025513.3 squaredObsR are 0.229502, respectively
0.220302, are greater than significance level 05.0 , the null hypothesis is accepted and therefore
the variances of the residues do not differ significantly (homoscedasticity hypothesis is accepted).
Figure no. 6. Residual tests for EQ06
Source: Own elaboration using Eviews
Also, the 029547.0Mean , 0425569.. DevStd , 240375.0Skewness and 654199.2Kurtosis
suggests that the residues have a normal distribution. This is confirmed by the Jarque-Bera test
value (0.847523) for that 05.065458.0Pr obability . In conclusion, we accept the null hypothesis:
the distribution of residues does not differ significantly from the normal distribution.
The EQ06 is a model ARMA (1, 4). The model R_3, for ROBOR9 data series is:
tt
tt
LLLuL
uy
43 934632.01252254.01275651.01973521'1
990445.3
(12)
respectively
875
4311
064988.0236031.001754.0
004166.1252254.0275651.0937521.0104662.0
ttt
tttttt yy
3.4. Acomparison between the performance of the models in 2011 – 2013 period
The results obtained by simulation of the ROBOR evolution, using the models identified in
comparison to the evolution of the values ROBOR, in the period January 2010 - December 2013,
are shown in Figure no. 7..
2
4
6
8
10
Jan-1
0
Apr-
10
Jul-10
Oct-
10
Jan-1
1
Apr-
11
Jul-11
Oct-
11
Jan-1
2
Apr-
12
Jul-12
Oct-
12
Jan-1
3
Apr-
13
Jul-13
Oct-
13
(%)
ROBOR R_1 R_2 R_3
Figure no. 7.. ROBOR evolution and the results of the models simulation in the period
January 2010 - December 2013 Source: Own elaboration using Eviews
R_3 and R_2 models simulate quite well the ROBOR evolution during 2010-2013, the most
advanced development model being R_3. Even so the model should be improved because in some
periods the simulated values differ significantly from those recorded.
4. CONCLUSIONS
Modeling the financial banking processes, for periods in which turbulences occur (reform,
restructuring, crisis, etc) is a difficult work, the achieved models can being used in forecasts only
with reserves and more precautions. This is the case of the model R_1, which, although the entire
period, approximates well the ROBOR evolution, its convergence in the periods of "relative peace"
is pretty weak.
For the periods crossed by turbulent phenomena, uncharacteristic to unfolding processes
under normal conditions in the financial markets, we consider it preferable to the development of
models defined on sub periods with trends relatively stable (no major discontinuities). The results
of the simulations of R_2 and R_3 models support this assertion.
An improvement of the results in the study of economic phenomena and processes using
autoregressive and moving average models can be obtained by supplementing them using the
factorial analysis to highlight the impact of various factors (exogenous variables) on analyzed
dependent variables..
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Publications, London.
Associate Professor PhD Mihaela Filofteia S. TUTUNEA
Faculty of Business, Babeș-Bolyai University of Cluj-Napoca, Romania [email protected]
Abstract:
Mobile technologies, applications and solutions in continuous development allowed the creation of a real
individual mobile infrastructure and the generation of a new mobile-based client profile to whom companies must
continuously adapt. Tourism is one of the most adaptive industries to the tendencies of experiential interactions of the
potential client. In case of users of mobile devices, mobile apps and mobile games were easily associated with a
background of leisure and entertainment offered by tourism services. For tourism companies the new challenge was to
identify new and innovative solutions that offer the advantage of differentiation on the concerned market; thus they
conceived adaptive marketing strategies centred on mix of tools that include mobile and travel games and that have
brought positive results generating the possibility of integrating and extending them through new gamification
solutions. During the last years, the gamification market has recorded an important increase, companies specialised in
the development of these solutions extending their offer to cover all types of activities. Starting from these aspects, we
considered useful the implementation of a study covering two facets: on one hand, identifying the offer of gamification
solutions dedicated to the tourism industry, on the other hand, identifying the Romanian tourists’ demand in their
quality of users of these solutions. We consider that the results obtained from the study can offer important sets of
information to tourism companies, companies developing gamification solutions and to users of mobile devices in their
role as tourists.
Key words: gamification, tourism, mobile apps
JEL classification: L86, L83, M15
1. INTRODUCTION AND LITERATURE REVIEW
Mobile technologies and their sustained development have visibly influenced the
transformation of an increasing number of people into mobile device users that on one hand,
generated a high level of mobility of individuals, on the other hand, importantly influenced their
behaviour depending on the mobility features offered by the technologies used. The changes
determined by the mobile technologies were perceived not only at individual level; also companies,
regardless of their field of activity, were obliged to adapt, extend or even move their activities
towards the new business environment, that of mobile business. Among the pioneers of the most
adaptive industries to the new technologies and the offer of the software industry was the tourism
industry. Tourism companies were obliged to follow and adapt their services offer to the tourists’
continuous increase in mobility, using mobile devices and technologies as well as mobile
applications dedicated to the category travel&local/tourism.
Taking into consideration these facts of the tourism market, companies in this field
developed adaptive marketing strategies for engaging clients and increasing their loyalty for the
tourism services and products offered by them. The majority of these strategies are focused on
mixes of tools also including mobile and travel games that have brought positive results, thus
generating the possibility for integrating and extending them through new platforms and concepts,
specific to gamification solutions.
In relation to the adoption of gamification solutions in tourism, Badgeville’s chief strategy
officer pointed out that “travel is a natural fit for gamification; the industry has been gamified for
years with frequent flier and hotel points programmes; all of the major travel players are looking for
ways to secure customer loyalty. Gamification helps them to create unique customer programmes to
drive long-term loyalty.” [3].
GAMIFICATION – A GENERAL IMAGE
Gamification, from general point of view, can be considered as being “the use, design,
elements, charateristics for games, in non-game context” [1].
In a more complex approach to gamification, the president of Octalysis Group, Yu-kai
Chou, identified a set of “8 core drives of gamification”, namely: “epic meaning & calling,
development & accomplishment, empowerment of creativity & feedback, ownership & possession,
ownership & possession, ownership & possession, unpredictability & curiosity, unpredictability &
curiosity” [7].
According to Badgeville company gamification solutions were adopted by all industries and
fields of activities but the quickest adapters of these solutions were communities, education,
environment, enterprise, government, health, marketing, news, social good, work [9].
From this perspective, in case of gamification two aspects can be identified: ”the creation or
use of a game for any non-entertainment context and/or goal, and the transformation of an existing
system into a game” [12].
Based on the context of gamification, nine specific categories were identifies: “commerce,
education/learning, health/exercise, intra-organizational systems, sharing, sustainable consumption,
work, innovation/ideation, data gathering”; the highest weight among these categories belongs to
“contextual education/learning, followed by intra-organizational systems and Work” [2].
From point of view of game design, the most frequently used solution in analysing the
interaction elements of the game was the triad MDA (Mechanics, Dynamics, Aesthetics)
Framework. According to the same author, “mechanics, are made up the functioning components of
the game, using primary elements: points, levels, leaderboards, badges, challenges/quests,
onboarding, and engagement loops”; Dynamics are defined as the “player’s interactions with those
mechanics”, while Aesthetics are “how the game makes the player feel during interaction” [16].
In case of gamification platforms some specific types were identified depending on the
mechanics and elements used, namely “general, schedules, socializer, free spirit, achiever,
philanthropist, disruptor, player”[11].
According to Badgeville company, the companies adopting gamification ensure the
following benefits “that would have direct contributions to the increase of the classes of
gamification parametric, namely: gamification metrics (“engagement, influence, loyalty, user
generated content, time spent, and virality”) and gamification non-metrics (“fun, revenue, SEO”)”
[8].
In case of gamification solutions implemented by companies from tourism and hospitality
industry we can find a quite comprising set, namely: “location-based augmented reality games,
gamified tour guides, adventure parks, cultural heritage and restaurant experience, gamification in
hospitality, in transmedia storytelling and in the aviation industry” [13].
Adopting gamification as a new concept in tourism was carried out by mixing two important
categories of gaming elements: “social games and location-based mobile games” [14].
Using gamification in tourism involved ensuring a set of important benefits to adopting
companies, that is to “encourage tourist engagement, enhance tourist experiences, improve tourist
loyalty, increase tourism brand awareness” [15].
Many times, gamification is seen as a form of engagement of mobile device users, in
general, in entertaining and educative activities facing them with various challenges or tasks to be
carried out, scores, leaderboards and different virtual and real recompenses; according to the experts
from Ojoo.com, the implementation of gamification solutions in tourism can generate three
important benefits, that are visitor engagement, visitor loyalty and promotion [6].
From point of view of clients/tourists, users of gamification solutions, Badgeville company
identifies two categories of benefits:
economic - resulting from the rewards won by the users of gamification platform;
social benefits - networking with other clients / tourists, belonging to a community,
achieving fun activities/time [8].
Gartner Inc., in the report entitled “Gamification 2020” underlined the importance of
mixing gamification with other technologies with the aim of obtaining positive effects in some
important fields such as ” innovation, the design of employee performance, globalisation of higher
education, emergence of customer engagement platforms, gamification of personal development”
[4].
According to the report prepared by MarketWatch on the global market of gamification
solutions, its value will be increasing to 11.10 billion dollars by 2020 from 1.65 billion dollars in
2015; up to 2020, the adoption of BYOD solutions in companies will increase considerably and
companies from Asia-Pacific will become one of the major adopters of gamification; for the same
time horizon, enterprise driven solutions will have the highest share in the gamification market [5].
Starting from the previously identified aspects and the existing tendency of tourism
companies to adopt gamification as innovative solutions for attracting and engaging tourists, as well
as increasing their loyalty, we considered useful to carry out a study covering two aspects: on one
hand, the identification of the offer of gamification solutions dedicated to the tourism industry, on
the other hand, the identification of the demand from Romanian tourists. We consider that the
results obtained from the study carried out can offer a useful base of information to providers of
specific services in the tourism industry, providers of gamification solutions and platforms from the
software industry as well as for actual users of these services, the tourists.
2. MATERIALS AND METHODS
a. GAMIFICATION SOLUTIONS - STUDY OF THE OFFER DEDICATED TO
THE TOURISM INDUSTRY
In order to obtain a more complete picture of the offer of gamification solutions, secondary
data sources were also taken into consideration available in reports prepared by specialised
companies; thus, according to the results of the study made by G2 Crowd, the world’s leading
business software review platform, concerning the category “The Gamification & Loyalty
Software”, based on customer satisfaction and scale (based on market share, vendor size, and social
impact) vendors were classified in four categories, namely: leaders, high performers, contenders,
niche products; there were identified mostly high performers: Tango Card
(https://www.tangocard.com/), LevelUp (https://www.thelevelup.com), and GetBadges
(https://getbadges.io/) and just one Niche product: Klout (http://www.klout.com/) [10].
On the other hand, well-known players also such as Badgeville (www.badgeville.com),
Bamboo (www.manumatix.com), Bigdoor (www. bigdoor.com), Bunchball (www.bunchball.com/) ,
Gigya (www.gigya.com), Keas (www.keas.com), Lithium Technologies (www.lithium.com/),
MindTickle (www.mindtickle.com/) , Pluck (www.demandmedia.com), PunchTab
(www.punchtab.com/), Spigit (www.spigit.com/) also have to be taken into account on the
gamification market. We must underline that these companies offer gamification solutions for
several industries that are not dedicated directly to tourism. Under this aspect, the study carried out
was focused on gamification solutions dedicated to companies from the tourism industry and aimed
the identification of a set of solutions that complement the offer of the big players on the
gamification market and could be considered suitable to small and medium companies.
The study was carried out online and in the process of identification of the most used
solutions in this field as product-vendor sets we analysed important characteristics of integration
with other types of specific IT solutions used by companies such as dashboards, CRM integration,
mobile applications, social media, API (application program interface), analytics, leaderboards,
website widgets, e-commerce integration, Point-of-Sale Systems integration, cloud platforms, social
media integration, collaboration tools, mini games, etc.. The price range of solutions was also taken
into account, namely from the low-end to average pricing range. We must stress the impossibility to
clearly separate the offer dedicated exclusively to the tourism industry and for this reason solutions
offered to the hospitality industry were also included and analysed.
The analysis of the offer of gamification solution providers to the tourism industry from
point of view of their characteristics led to the identification of 17 product-vendor sets, listed in
alphabetical order in Table no. 1.
Table no. 1. Gamification solutions and platforms for the tourism industry
Product name Vendor
1. All Digital Rewards http://alldigitalrewards.com/
2. Belly https://www.bellycard.com/
3. Bunchball http://www.bunchball.com/
4. FiveStars http://www.fivestars.com/
5. Funifier http://www.funifier.com/
6. GamEffective http://www.gameffective.com/
7. LaunchFire http://www.launchfire.com/
8. LevelUp https://www.thelevelup.com
9. Mass Mobile http://www.massmobileapps.com/
10. Playful Shark http://playfulshark.com/
11. Preferred Patron http://www.preferredpatron.com/
12. Pug Pharm http://www.pugpharm.com/
13. Social Rewards https://socialrewards.com
14. SoInteractive http://www.sointeractive.co/
15. Splick-it https://www.splickit.com/
16. The Brand Club http://hooptap.com/
17. VY Engagement Platform http://www.vyify.com/
We consider that the set of products resulting from the study can provide reliable
information to tourism companies that intend to adopt gamification solutions with the aim of
obtaining a major benefit for differentiation on the relevant market.
b. GAMIFICATION SOLUTION FOR TOURISM - STUDY CONCERNING THEIR
USE BY ROMANIANS
The study considered important aspects related to the mobile device users’ behavioural
adaption to the permanent challenges brought in by the mobile technologies and applications that
appear continuously as a support of daily activities; it focused on Romanian users in their role of
tourists and experimenters of tourism services as well as on their adoption and use of innovative
solutions, namely gamification.
From structural point of view, the study concerned the following aspects:
Identification of the level of knowledge and usage by the Romanian tourists of the
mobile solutions innovatively used by tourism companies, comparing the use of
gamification solutions and mobile applications specific to travel/tourism;
Drawing the profile of Romanian tourist, user of these solutions as well as the
identification of their preferences, experiences and their assessment.
For the implementation of the study two time periods were chosen to include two different
touristic seasons in order to open future possibilities to comparing the results obtained.
The two periods were 15th June – 15th September 2015 and 15th December 2015 – 15th
March 2016. The mobile survey method was used, thus the questionnaire was administered only on
mobile social networks; the studied population was represented by Romanian users of mobile
devices in their quality of tourists; the sampling was carried out using simple random sampling. At
the end of the two periods the final sample consisted of 979 respondents; data coming from 948
valid questionnaires were analysed.
The questionnaire was structured in three modules comprising a total of 13 questions; each
module of the questionnaire was dedicated to the identification of a specific profile of the
respondents, namely:
socio-demographical;
users of mobile devices and applications from the travel&local/tourism category;
users of gamification solutions in tourism vs. mobile apps for travel&local.
3. RESULTS AND DISCUSSIONS
The analysis of collected data provided the following results:
The first module allowed the identification of the respondents’ socio-demographic
structure showing approximately equal segments of female and male respondents, with a
larger representation, over 20%, of the age group between 25 and 54 years, a larger
group (over 30%) of respondents with college and university education (Table no. 2.).
Table no. 2. Socio-demographic structure of the pool of respondents (%)
Gender
Women 49.93
Men 50,07
Age
18-24 years 19.17
25-34 years 25.60
35-44 years 23.78
45-54 years 20.16
55-64 years 8.12
65+ 3.17
Education
Basic 0.21
High school 21.13
College 30.76
University 41.89
Post university 6.01
Based on data from the second module, the profile of the user of mobile devices and
applications dedicated to tourism was identified:
o A segment of smartphone owners clearly differentiated itself (90.20%), while
smart device users had a very low proportion (5.14%); 67.65% of the
respondents own more than two mobile devices, while the segment of owners of
wearables was very small (7.34%) (figure 1);
Figure 1 - Mobile devices used (%)
o The declared users of mobile apps from tavel&local/tourism category
represented only 30.12%, of which the most used mobile application sub-
categories were: finding information (28.45%), booking (24.89%) and
guidance/maps (24.23%) (figure 2).
Figure 2 - Mobile tourism apps category used (%)
Based on the data from the third module, three important results were identified:
o User/non-user segments of gamification solutions (Table no. 3.)
The profile of the non-user of gamification solutions is clearly identified
(79.87%); these solutions were used exclusively from abroad, as tourists
(94.11%); most frequently used in Restaurant/pizzeria/eating facilities (28.98%),
followed by Club/bar (27.18%) and Museums/exhibitions (19.24%);
Table no. 3. Use of gamification solutions (%)
The use of gamification in travel
Yes 20.13
No 79.87
The country where gamification was used
In the country 5.89
Abroad 94.11
The location
Hotel/other accommodation 12.11
Club/bar 27.18
Restaurant/pizzeria/other restauration locations 28.98
Museums/exhibitions 19.24
Events/concerts 6.12
Locations for entertainment/trips/amusement parks 6.37
o The experiences and benefits perceived by the users of gamification solutions
Over 92.34% of users of gamification solutions declared that they had a
pleasant experience; in the list of mechanics the first three indicated were
points (78.12%), badges (73.34%) and coupons (70.23%) (figure 3);
Figure 3 - The mechanics used (%)
Prizes (75.12%), Communication (68.32%) and Entertainment (67.23%)
were the most appreciated benefits, while Education/information/orientation
(40.76%) was named as the less important benefit (figure 4)
Figure 4 - Final benefits for the users (%)
o The responding tourists’ preference in the comparative use of gamification vs.
mobile apps and games for travel (Table no. 4.)
Comparing the use of mobile apps for tourism vs travel games vs gamification,
mobile apps were situated on the first place (50.7%), followed by gamification
(36.78%).
Table no. 4. Potential preferences for apps and games
Mobile apps 50.77
Travel games 12.45
Gamification 36.78
4. CONCLUSIONS
The results obtained from the study carried out allowed the identification of the Romanian
tourist’s profile as a user of gamification solutions. The Romanian tourist, experimenter of
gamification solutions, belongs to an extremely narrow segment of users; the solutions were
experimented only abroad and mostly in locations for having meals; s/he used gamification
solutions using mostly points, badges and coupons as mechanics and perceived the Prizes category
as the main benefit of using gamification solutions; s/he also declared the preference for using
mobile apps for travel/tourism versus gamification.
The development of the mobile infrastructure used by present day individuals and the
change in behaviour generated by the infusion of new mobile technologies, applications and
solutions that increase their experiential attraction, generated the profile of a new mobile-based
client that has to be taken into account by service providers and to whom they must continuously
adapt.
Among the industries that must adapt to this tendency to experimental interaction of the
potential client are the tourism services; these services being perceived by the tourist clients as
providers of leisure and entertainment activities, were easily and automatically associated with
other types of activities from these categories; thus, for the mobile device, mobile game and
gamification users they have become the perfect match. The adoption of these innovative solutions
starting as a first level with the mobile applications and then adopting gamification solutions,
brought positive results to tourism companies.
Starting, on one hand, from the statistical data that outline a global market of gamification
solutions in full development, on the other hand, from the increasing trend in the number of
companies from the tourism industry adopting these solutions, we consider that the identification of
a set of gamification solution providers dedicated to the tourism industry can provide an
informational base and support in making the decision to adopt gamification in specific activities;
we also consider the solutions offered by the providers revealed in the study, especially those
dedicated to small and medium companies can offer the adopters from the tourism industry an
advantageous alternative from financial and integrational point of view in comparison to the offers
of large companies on the gamification market.
From another perspective, the results of the study regarding the use of gamification
solutions in tourism by Romanians, offers useful information to a few important categories, namely:
Tourism companies
o Highlighting a large segment of non-users of gamification solutions in our
country and experimenting these solutions only abroad shows a very low level of
adoption of gamification solutions by the tourism companies from Romania in
order to attract, engage and increase the level of loyalty of clients;
o The existence of a narrow category of gamification solution providers, namely
public restauration locations, points out again the lack of interest in approaching
gamification solutions by the other tourism service providers from Romania,
such as accommodation, transport, events, entertainment, etc.
Companies developing gamification solutions
o The choice of the design of gamification solutions must be adapted to the users’
profile and the industry they are dedicated to; thus, through gamification
solutions the level of perception of benefits can also be increased from the
material level to that of communication and education;
o The preference of Romanian tourists for gamification can also be exploited, even
if this comes second after mobile applications in the tavel&local category; a
better information and promotion of gamification solutions for tourism would
increase the tourists’ level of attraction to these solutions;
The tourists, users of mobile devices
o The very high level of non-use of gamification solutions might indicate, on one hand,
lack of knowledge of these solutions, on the other hand, lack of concern from the
part of Romanian companies in promoting these solutions among tourists.
Limitations
We consider that the results obtained from this study have a few limitations related to the
impossibility to fully identify all gamification solutions and providers as well as the lack of a very
high representativeness of the studied population; but, starting from the set of results obtained, the
study can be extended to other samples of population, geographical regions and variables analysed
and a comparative study can be carried out in relation to the respondents of the two periods covered
by the study.
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Prof PhD P. RATHNASWAMY Wollega University, Ethiopia
Lecturer PhD Marilena-Oana NEDELEA Ștefan cel Mare University of Suceava, Romania
Abstract:
Austria had in 1920 Constitutional Court followed by Italy in 1946, Germany in 1949, Romania in 1989, South
Africa in 1991, and Ethiopia in 1995. Each Constitution has its provisions on the constitutional interpretation. Romania
has its own provisions and it is considered here its legality and the best possible measures and recommendations for
future. Judicial power is vested in judiciary to interpret constitution, laws, and actions of other organs of government.
Judicial review is the function resulted upon judicial power. Political body joins through the appointment of its
members in the judicial review and it limits the independence of judiciary. It also reduces the values of separation of
powers. Challenges and opportunities of growth and development do influence the spirit of separation of powers and
judicial independence. The principle of inherent judicial power in judiciary inducts upon the constitutional
interpretation. Thus, the principles of constitutional interpretation are varying in Romania and other similar
constitutional courts of Germany, Ethiopia, and Italy but not in South Africa.
Key words: Constitution, Court, Judiciary, Judicial Power, Judicial Review, Political Body
JEL classification: K40, K41, K49
1. INTRODUCTION
Every constitution accepts that the supremacy of law of land is constitution. No law shall
disengage the provisions of constitution as illegal and unlawful and such laws held void and invalid
in order to preserve the sanctity of the Constitution. There are various provisions which stipulate the
conditions to be adapted to the Constitution and these are international human rights laws, treaties
etc. At the same there are judicial reviews which do not allow the positive changes of the
aspirations of people and it has lead to judicial activism. Judicial activism is an important
instrument of change in the constitutional interpretation. Incorporating political body in the
constitutional interpretation is the instrument of change that becomes part of constitution. This
indicates the principles of post modernity of constitutional interpretation of Romania.
2. PROVISIONS OF CONSTITUTIONAL INTERPRETATION
The Constitutional Court is established in 1989 through Law no. 47/1992. It has political
consequence on the appointment of nine judges of each three by the Chamber of Deputies, the
Senate, and the President respectively with the tenure of nine years (Article 142, Para 3 of the
Constitution of Romania) The Constitutional Court is the authority to exercise the power of
constitutional interpretation and the Court passes orders, decisions, rulings and notices(Article 11 of
Law no. 47/1992). There are two powers of judicial review such as prior review to decide on the
constitutionality of laws before legislating and posteriori review after legislation.
1. The Constitutional Court of Romania has the power of judicial review. There are two kinds
of judicial review such as priori review and posteriori review.
2. It decides constitutionality of the only agitated acts and it is not competent to modify or
supplement the provisions of the act (Article 2 para.3 of Law no. 47/1992).
3. On admission the Court can decide constitutionality of other provisions of the act(Article 31
paragraph 2 of Law no. 47/1992)
4. The Court has to uphold the supremacy of the Constitution.
5. The Court decides on the constitutionality of laws, ordinances and legislation in force.
6. Where there is a conflict of law between the covenants and treaties on fundamental rights,
and national law, the international regulations prevail (Article 20 (2), the Constitution of
Romania ).
7. There shall be constitutional interpretation on freedoms and rights in accordance with
Universal Declaration of Human Rights and other covenants and other treaties to which
Romania has consented to (Article 20 (1), Romanian Constitution ).
8. There shall be constitutional revision to that extend if any provision of the treaty is
repugnant to the provisions of the Constitution and accordingly there is constitutional
interpretation (Article 10, Romanian Constitution ).
9. The constitutional interpretation should be guided by the principles of the Rule of Law
(Article 1 (2), Romanian Constitution ).
3. INDEPENDENCE OF CONSTITUTIONAL COURT
The Judges of Constitutional Court hold office irremovable during their term of office and
enjoy independence (Article 145, Romanian constitution). They are not held legally liable for their
opinions in course of discharging their duties (Article 61 Para 2, of law no. 47/1992). Their salary
and pension are protected. Their rank is equalent to the Vice President of High Court of Cassation
and Justice except the President of Constitutional Court who is equalent to the President of the High
Court of Cassation and Justice and their salary is hiked by 15% (.Article 70 of Law no. 47/1992).
On the Ruling of the Plenary of the Constitutional Court the Judges of Constitutional Court may be
removed from office as mentioned below (Article 67 Para 2, of law no. 47/1992)
1. under the conditions of incompatibility; 2. on impossibility of exercising the office of the Judge
not less than six months; 3. loss of Romanian citizenship; 4. on change of residence in abroad; 5. on
joining any political party, and 6. on the failure of the following obligations:
(i). biased;
(ii). disclosing deliberations;
(iii). taking a view in public;
(iv). tendering consultancy on matters within the jurisdiction of Constitutional Court;
(v). disclosing the nature of voting in the proceedings;
(vi) absenting from voting when it is obligatory;
(vii) conducting in a manner incompatible with the mandate;
(viii) extending the office to trade publicity;
(ix). taking part in propaganda of any kind;
(x). abstaining from any activity;
(xi) displaying contrary to the independence; and
(xii) failing to uphold the dignity of office (Professor Tudored TOADER (2011)
The Constitutional Court acts as the guarantor of the supremacy of the Constitution (Article
142 (1) it is independent of any public authority (Official Gazette of Romania (2003). It has
independent budget. The Constitutional Court has its administrative autonomy with rules and
regulations, standing rules as per the Law on the Constitutional Court and its personnel (Official
Gazette of Romania (2005). It has established its own procedure and power to reprimand delinquent
judges. The decisions of the Court are final and enforceable but not retrospectively. The
Constitutional Court of Romania has 9 judges of whom 3 judges are appointed the Chambers of
Deputies, the Senate and the President of Romania for 9 years and one third of them retires and
renewed (Article 147, Constitution of Romania)
The Constitutional Court of Italy is composed of 15 judges of whom each 5 judges are
nominated or elected by the President, Parliament and judges from other Courts respectively. .
The Constitutional Court of South Africa has been established in 1994, due to the distrust in
the Apartheid regime of South Africa. While inaugurating the Constitutional Court of South Africa
the then President Nelson Mandela reminded during the apartheid regime he appeared as accused of
death penalty but now he appeared to inaugurate it as the representative of people((Nelson Mandela
(1995). It was the first democratic institution. The Court has 11 member judges to decide all the
constitutional matters and it is the highest court of South Africa. In 1920 African National Congress
passed resolution to have bill of rights and it reflected in Freedom Charter of 1955. It was debated
in detail in 1991. It was found in the judiciary majority of the judges were white and male and
therefore it was decided to have Constitutional Court. The interpretation of bill of rights is to be
guided by international law and foreign law decisions in addition to all other aspects (Section 39,
South African Constitution) , due to the apartheid practice. The power of constitutional
interpretation is vested in the Constitutional Court on the interpretation, protection and enforcement
of the Constitution (Section 167 (7), South African Constitution). It is complete judiciary without
any political body. The Constitutional Court of South Africa is the independent judicial system
unlike outside the system in case of Romania, Ethiopia, Italy or Germany. In Ethiopian Constitution
there was similar view point of distrust on judiciary and the Constitutional interpretation is
entrusted with the House of Federation of Ethiopia (Assefa Fiseha (2007). The House of Federation
is one of the Chambers of Federal Legislature in Ethiopia (Samrawit Tadesse.) and ( Assefa Fiseha
(2007).
4. JUDICIAL REVIEW
There shall be judicial review of public authorities’ administration action, administrative
disputes, and the cases with pertaining to parliament (Article 124 (6), Courts of Law, Constitution
of Romania) The Constitutional of Court Germany is the arbiter of disputes between the executive
and legislature and has the power of judicial review on the legislative acts and the actions of
judiciary and executive (Hans G. Rupp (1969). He considers that the jurisdiction and scope of the
Constitutional Court of Germany is wider than the Supreme Court of America. The Italian
Parliament passed the New Electoral Law on May 2015 but the Italian Constitutional Court partly
disallowed the ‘run off’ counting on the basis of proportional representation on 25th January, 2017
(Financial Times (2017). A team from United States of America visited during the period of
constitution making in 1991, Ronald D. Rotunda (1991) as one of them said that while people work
for their cause they are happy because they are not working for masters. He remarked that one of
the Prosecutors of earlier regime that he was not convinced of the system under which the judiciary
functioned. There are several forms of constitutions. Romanian Constitution represents quasi-
federal. India has quasi-federal during emergency but otherwise it works with the principles of
cooperative federalism. The federalism does not play an important role on the federal constitutional
interpretation (Anna Gamper (2014). The judicial power of the Swiss Federal Court has limited
jurisdiction of constitutional interpretation despite being a federal state. The decisions of the
Federal Court of Switzerland are subject to appeal before the European Court of Human Rights. It
has the power of judicial review of the law and its application. The Swiss Federal Supreme Court
creates new jurisprudence through its decisions which are adopted to interpretation of laws, and
regulations. When there is controversial decision which may be adopted in the new laws. The
Constitutional Court of Romania has all the powers of judicial review except fundamental rights,
freedoms and other rights unless these rights are found in the constitutional revision as there is no
right of appeal.
The judicial power is scattered in the Constitution of Romania and it becomes difficult for
citizens to get justice. There is the provision of the guarantor of the supremacy of the Constitution
but it is not possible without independence of judiciary. The appointments of judges are by political
body. It has the impact of political influence on the referral to the Court for adjudication of
Constitutionality by the President of Romania, the President of either of the Chambers, the High
court of Cassation and Justice, the Advocate of the People, with a minimum 50 Deputies or at least
25 Senators. Similarly the minimum 50 Deputies or at least 25 Senators and the President of either
of Chambers are required to refer it to the Court on the constitutionality of the Standing Orders,
treaties or other international agreements. All the powers of adjudication are exercised on the
referral by political bodies. It discloses a closed judicial power of the Constitutional Court of
Romania and the predictability of assuming the role of guarantor of the supremacy of the
constitution is highly challenging. The scattered judicial powers are circumvented with political
resolutions and thus the judicial powers are definitely animated version of judicial review. The
decisions of the Constitutional Court on any provisions of the laws and ordinances including
regulations in force will be enforceable on 45th day of publication when the parliament or
government has failed to bring decided unconstitutional provisions into the constitution. The effect
of unconstitutional provisions will continue to remain in force until then. It is a kind of judicial
review which aims to cope with the changes but not to give relief immediately. This is nothing but
continuance of illegality despite being declared illegal.
The Constitutional Court declared unconstitutional of the provisions of Government
Emergency Ordinance no. 37, April 22, 2009 under the Decision no.1257 (Official Gazette of
Romania (2009) dated 7, October, 2009 and these unconstitutional provisions were placed in the
Government Emergency Ordinance no. 105, 6, October 2009. Again the Constitutional Court
declared unconstitutional the same provisions by the Decision no. 1629 of December 3,
2009(Official Gazette of Romania (2010). Further the same unconstitutional provisions were
included in the Law no.188/1999 and these provisions were again declared unconstitutional in the
priori review (Official Gazette of Romania (2010).
5. JUDICIAL POWER
The Constitution of Romania has not explicitly defined on the judicial power but it may be
inferred from various provisions enshrined in the Constitution. Justice is given in the name of law
and judges are subject to the law only. Justice is impartial and it is for all equally (Article 124 ,
Administration of Justice , the Constitution of Romania). The Constitutional Court is the guardian
and guarantor of the supremacy of the Constitution (Article 140(1), Constitution of Romania ).The
Constitutional Court of Romania is vested with judicial power. The High Court of Cassation and
Justice and any other courts, which are created under the law, have judicial power to interpret and
decide the law (Article 126 (1) and (3), Courts of Law, Constitution of Romania). The Superior
Council of Magistracy ensures independence of the judiciary (Article 134(3), Constitution of
Romania).It is also stated that the decision of the Superior Council of Magistracy on disciplinary
case is liable to appeal before the High Court of Cassation and Justice (Article 133(1), Constitution
of Romania). In fact the President of High Court of Cassation and Justice participates in the
decision without voting right (Article 134(2), Constitution of Romania). The President of Romania
can be the Chairman of the Supreme Council of Magistracy (Article 33 (6), Constitution of
Romania). All these provisions do not envisage independence of judiciary and therefore the judicial
power is inaccurate. There are so many authorities of political body in the exercise of judicial
power. The serration of power is missing to achieve independence and non- interference in the
judicial function. There is Court of Audit which deals with the formation , administration and use
of financial resources of the state and the public sector and the disputes arising out of it shall
decided by the specialized courts, established by the organic law(Article 140, Constitution of
Romania). The judicial power is vested in Courts and the Swiss Federal Supreme Court is the court
of final appeal. It is the supreme judicial authority in Switzerland with 38 ordinary judges and 19
deputy judges. Judicial powers are vested in both Federal and State Courts in the Constitution of
Federal Democratic Republic of Ethiopia (Article 79, Constitution of FDRE ) The Federal Supreme
Court is the final judicial power over judicial matters (Article 80(1), Constitution of FDRE)..
Romania has incomplete judicial power as the power of constitutional interpretation is with the
Constitutional Court except the fundamental rights and freedoms. Further the Fundamental Rights
and Freedoms are interpreted in accordance with the provisions of Universal Declaration of Human
Rights, International covenants on Human Rights and international instruments adopted in Ethiopia
(Article 13(2), Constitution of FDRE, Federal Democratic Republic of Ethiopia). Ethiopia is not
member of European Union like Romania but still it has voluntarily limited the judicial power of
courts in Ethiopia (Samrawit Tadesse.) The judicial power is vested in courts in South African
constitution (Section 165 (1), Constitution of South Africa). The guarantors of the independence,
impartiality, dignity accessibility and effectiveness of the courts are organs of state through
legislature and other measures (Section 165(4), Constitution of South Africa). This provision does
not establish of judiciary on its own but the organs of state through legislature and other measures.
Definitely it does not empower the judiciary. Correctly Section 173 has been amended in 2012 to
empower the constitutional Court, the Supreme Court of Appeal and the High Court of South Africa
with inherent power for protection of its process and development of Common law (Section 173,
Constitution of South Africa). The Republic of Sovereign in one and it is indivisible. It is a
sovereign stat. It is democratic state. One of the values is the supremacy of the constitution and the
rule of law (Section 1, Constitution of South Africa). Further the Constitution defines that the
constitution is supreme law of the Republic and no law or conduct will be inconsistent with the
Constitution (Section 1, Constitution of South Africa).. Keeping in view of them the provision of
Section 165 (4) is inconsistent with Section 2 of the South African Constitution. The judicial power
is vested in the judges in the Constitution of Germany (Article 92, Basic Law of Federal Republic
of Germany). This power is exercised in the Federal Constitutional Court, Federal Courts and other
courts of Lander. The Federal Constitutional Court has the power of constitutional interpretation
(Article 93(1), Basic Law of Federal Republic of Germany). The composition of the Federal
Constitutional Court includes 50% of Federal Judges and other members who are elected from the
Bundestag, the Bundesrat, the Federal Government, and any of the bodies of a Land (Article 94(1),
Basic Law of Federal Republic of Germany). Incidentally the federal law decides regulation,
organization and procedure of the Federal Constitutional Court including the decisions which shall
be enforceable when and what instances (Article 94(2), Basic Law of Federal Republic of
Germany). Even though the judges are independent and they are subject only law but they may be
removed or retired or transferred or suspended before the expiration of the term of office under
certain conditions (Article 97, Basic Law of Federal Republic of Germany). Thus there is no
security of tenure resulting into poor independence of judiciary. Moreover the judicial power is
vested in judges and therefore the judicial power is controlled power. The Federal Constitutional
Court shall be a federal court of justice which is independent of other constitutional organs (Federal
Constitutional Court Act (2015). The Federal Constitutional Court is empowered to frame its own
rule and procedure which will be adopted by the Plenary which is contrary to the provision of the
Constitution (Federal Constitutional Court Act (2015). The Federal Constitutional Court will be of
two Senates with 8 judges of each and three of each shall be elected from the judges of the Supreme
Federal Courts. The judges of the Senates are elected by the Bundestag and the Bundesrat equally
((Federal Constitutional Court Act(2015). The Federal Constitutional Court has both the power of
judicial review and interpretation of the constitution, Basic laws and the First Senate and Second
Senate are allotted with them various provisions for judicial review ((Federal Constitutional Court
Act (2015). There are certain conditions like permanent incapacity for office, conviction for offence
committed etc. for which the Federal Constitutional Court may authorize the Federal President for
suitable disciplinary actions against such judges (Federal Constitutional Court Act (2015). In
Germany the constitutional interpretation is not by an independent judiciary rather by a committed
judiciary. Moreover the judicial power is vested in courts but in judges. It erodes the continuity of
the judicial wisdom which is very much essential for growth and dynamism. Similar is the position
of Romania.
6. CONCLUSION
Chief Justice John Marshall has established the rules of judicial review in American
Constitution (Marbury v. Madison (1803). The decision has concluded that that the Supreme Court
is the final arbiter of the constitution and Constitution is supreme law of the land. The British
Constitutional history struggled to prove the values of Magna Carta. In the process it has developed
three conceptions: the Supremacy of the Law, the Supremacy of the Crown, and the Supremacy of
the Parliament (Dr. P. Rathnaswamy (1998). In Fuller’s case (1607-08) Lord Chief Justice Sir
Edward Coke held that the common law is supreme and nobody is above law including King. He
added further that ‘the king cannot change the common law’. Thereby the supremacy of the Crown
is altered to the supremacy of law. However the supremacy of the parliament is prevent even today
in UK. While UK was a member of European Union, the supremacy of parliament was acceded to
the supremacy of law in terms of European Court of Justice. If the law of the land is the
Constitution then the constitution has to be supreme. The Courts can only protect the supremacy of
the law and constitution and not a weak judiciary like Romania. The supremacy of the constitution
of Romania is made as obligatory only (Article 1(5), the Constitution of Romania ), and the
exceptional rules to obligation cannot be concluded unlawful or illegal. There is also provision of
separation and balance of power among the three organs of state such as legislature, executive and
judiciary (Article 1(4), the Constitution of Romania). The separation and balance of power does not
mean the separation of power but balanced power. Interdependence is a kind of balance but not
independence. Thus the judiciary is deliberately made as balanced and not independent. The
constitutional democracy is not antithesis to separation of power. The observance of the constitution
is left to the President of Romania (Article 80(2), the Constitution of Romania ), and the
observation is obligatory function of executive. The independence of the judiciary is correlative
function of executive. The guarantor of the independence Constitution is the Superior Council of
Magistracy (Article 133 (1), the Constitution of Romania). The guarantor of the supremacy of the
constitution is Constitutional Court (Article 142(1), the Constitution of Romania). The Supreme
Court of India has included the independence of the judiciary as one of the basic structure of the
Constitution (Keshavananda Bharathi v. State of Kerala (1973), and no legislation or any act can
take away the independence of the judiciary as that legislation or act will be held void and illegal.
When the National Judicial Appointments Act 2014 through 99th Amendment of the Constitution of
India was passed in the Parliament, the Supreme Court Bar Association held a meeting to debate on
the Act on 18th August 2014, at Supreme Court of India, New Delhi, India and a future course of
action. I spoke that the said Act (NJAC Act 2014) will be held invalid as it undermines the
independence of the judiciary through appointments of judges by political body and civil society.
Senior Advocate Prashant Bushan held the same view. The Supreme Court rejected the NJAC Act
and 99th Amendment to the Constitution as unconstitutional and void (Justice K S Khehar (2015).
This is Constitutional Bench judgment with 4:1. The Constitutional Bench consists of Justice K S
Khehar, Justice A. Chelameswar, Justice Madan B. Lokur, Justice Kurian Joseph, and AK Goel.,
The Constitution Assembly entrusted to five eminent jurists to frame the constitutional provisions
on independence of judiciary, Supreme Court of India and judicial review. They recommended
independence of judiciary. The ad hoc committee consisted of B. N. Rao, Munshi, Mitter,
Vardachari and Ayyar Chief Justice of the Federal Court. Every independent judiciary must enjoy
freedom from other organs of government. It should be ensured in Romania. The appointments by
political body definitely undermine the independence of judiciary and supremacy of the law. The
judgments shall be impartial and enforceable immediately. This has to be implemented in Romania.
Romania is fast growing economy and it has to establish vibrant legal system.
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Constitutional Court of Romania, National Report 2011.
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and Procedure, Notre Dame Law Review, Volume 44/Issue 4, Article , 1969
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Constitutionalism, Perspectives on Federalism, Vol.6, issue 2, 2014
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African History on Line, April, 24, 2014
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of International Human rights Provisions, Addis Ababa University, Centre for Human
Rights
9. Assefa Fiseha (2007), Constitutional Adjudication in Ethiopia: Exploring the Experience of
the House of Federation(HOF), Mizan Law Review, Volume 1, No.1, June 2007
10. Marbury v. Madison (1803), 5 US 137-1803, Supreme Court, “An act of the legislature
repugnant to the Constitution is void…..It is emphatically the province of the judicial
department to say what the law is...” (Marbury v. Madison (1803)
11. Dr. P. Rathnaswamy (1998), Political Question and Article 356, Manas Publications, new
Delhi, India,1998
12. Fuller’s case , Day v. Fuller(1607-08), 15, f, 262 1607/08
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India 1973
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(2016) said,” It is difficult to hold that the wisdom of appointment of judges can be shared
with political –executive. In India, the organic development of civil society has not as yet
sufficiently evolved. The expectation from the judiciary, to safeguard the rights of the
citizens of this country, can also be ensured, by keeping it absolutely insulated and
independent, from the other organs of governance”.
15. Official Gazette of Romania (2003), Part 1, no.758 of October 29, 2003, of the
Constitutional Court Ruling no. 3 of October 22, 2003
16. Official Gazette of Romania (2005), Law no. 124 of July 13, 2000, published in the Official
Gazette of Romania, Part I, no. 331 of July 17, 2000, and Approved by Ruling no. 2 of
January 28, 2005 of the Plenary of the Constitutional Court and published in the Official
Gazette of Romania, Part I, no. 116 of February 4, 2005
17. Official Gazette of Romania (3009) , Part I, no. 758, November 6, 2009
18. Official Gazette of Romania(2010), Part I, no. 28 , January 14, 2010
19. Federal Constitutional Court Act (2015), Part I of 1 (1) , Constitution and Jurisdiction of the
Federal Constitutional Court, Federal Constitutional Court Act of 12 March 1951( amended
up to 31 August 2015)
20. Federal Constitutional Court Act(2015), Part I of 1 (3) , Constitution and Jurisdiction of the
Federal Constitutional Court, Federal Constitutional Court Act of 12 March 1951( amended
up to 31 August 2015
21. Federal Constitutional Court Act(2015),Part I of 5 (1) , Constitution and Jurisdiction of the
Federal Constitutional Court, Federal Constitutional Court Act of 12 March 1951( amended
up to 31 August 2015
22. Federal Constitutional Court Act(2015),Part V of 105 (1) , Final Provisions, Federal
Constitutional Court Act of 12 March 1951( amended up to 31 August 2015
Lecturer PhD Petronela SCUTARIU
Faculty of Law and Administrative Sciences, “Ștefan cel Mare” University of Suceava, Romania [email protected]
Abstract:
In the public sector the running of administration process at the level of administrative-territorial units has
always sought and today too aims to ensure the management efficiency of public affairs in the service of the local
community. From such a direction, in the space of this article we intend to analyze the significance of the local
autonomy and its manifestation in local public resources plan to highlight their importance for the efficiency of public
administration in territorial-administrative units. The approach carried out in the pages of this paper showed that the
local autonomy, understood as democracy at local level, on the one hand, and the financial, human, material and
information resources, on the other hand, are of paramount importance for the good functioning of the local
administrative mechanism. Without these resources the autonomy can not fully manifest, the local public administrative
authorities being unable to fulfill their responsibilities, situation that endangers the functioning of local administrative
system as a whole and that, finally, generates the inefficiency of the administration process from administrative-
territorial units.
Key words: public administration, local autonomy, local public resources, efficiency, administrative-territorial
units, local communities
JEL classification: H83
1. INTRODUCTION
„One can govern from afar, but one can administer only closely”, statement made long ago
by Louis-Napoléon Bonaparte and remained famous opens the way to the start of this approach.
The merit of this statement is that it manages to distribute the powers within the public
administration, separating the central decision-making level ("afar") of the local one ("closely"). If
we ask what is the purpose of this demarcation, the answer is simple: the increase of public
administration efficiency by recognition of local decisional power to adapt the decisions and the
actions to specific local conditions. On this support, by the content of this paper we propose to
analyze the importance of the local autonomy and of the local public resources, essential
components in ensuring the efficiency of public administration in administrative-territorial units.
In this registry, by the approach that we are taking we want to find an answer to the
question: What role have the autonomy and the public resources for supporting the efficiency of
administration process at the local government institutions and authorities level?
From such a direction, this paper aims at achieving the following purpose: analysis of local
autonomy and its manifestation in local public resources plan to highlight their importance for the
efficiency of public administration in territorial-administrative units.
The objectives that support the achievement of the proposed purpose and that we aim to
achieve in the following pages concern:
- highlighting the position of components local autonomy and local public resources in
the center of the reformative concerns
- explaining the significance of local autonomy and of its fields of manifestation in the
local public resources plan
- highlighting the importance of local autonomy and of local public resources for the
efficiency of administration process in administrative-territorial units.
The achievement of the goal formulated and of the proposed objectives requires the use,
from a methodological perspective, of the qualitative dominant approach. Through this approach
we will analyze in depth the components local autonomy and local public resources to highlight
their importance in effective management of public affairs in administrative-territorial units.
2. THE COMPONENTS LOCAL AUTONOMY AND LOCAL PUBLIC
RESOURCES - REFORMATIVE CONCERNS
The approach of theme of autonomy and resources importance to improve the efficiency of
public administration in territorial-administrative units is also sustained because the public
administration reform, about which it is spoken so much and lasts for several years, does not avoid
the subject. In the context of changes that public administration faces with, the purpose of any
process of reform and modernization is and must be the efficiency of management of public affairs.
The development of an efficient administration, oriented towards the needs of society, is not
a superficial goal and can not be achieved in any moment. Therefore, starting on the premise that
local government is closest to the citizen and to meet his interests it needs all the necessary levers to
solve local issues, one of the priorities of the government that finished is to improve the efficiency
of public administration, in the service of the citizen. [1] In addition, by the assumed Plan of
Measures one of the objectives on which the former government focused its activity aims to
continue the process of administrative decentralization and strengthening of local autonomy, by
reducing the role of central government at the one of strategy, policies and control, while
increasing financial resources at the local level. [2] A strong argument for continuing the process
of decentralization and bringing a broader autonomy is that local government authorities are best
placed to meet the needs of the local community members, whereas they know more closely the
problems of the latter and, as such, they can search for and identify the most appropriate solutions
to resolve them.
Further, by Strengthening strategy of the public administration for the period 2014-2020 it is
established that Romania will have an efficient public administration and responsive to the needs of
society. In this regard, among the priorities listed in this strategy one can find the public
administration reform in the achievement of which one of the main objectives is increasing of the
autonomy of the local colectivities by the real triggering of decentralization process, respecting the
principle of subsidiarity [3]. Also, among the specific objectives one can find strengthening the
financial capacity of the local public administration authorities in the achievement of which the
strategy proposes an integrated approach covering both the legal framework and the mechanism
for allocating resources from the state budget and strengthening the capacity of the local public
administration authorities to manage efficiently their own resources and to generate their own
income [4].
In addition, a current topic that is presented as an expression of local autonomy is the
regional policy which is oriented towards reducing the existing regional disparities by focusing on
stimulating a balanced development and on the revitalization of disadvantaged (underdeveloped)
areas [5].
Consequently, that is why that the location of components local autonomy and local public
resources in the center of current reformative concerns of the times which we are passing through
imposes their approach and offers to the present paper a current character.
3. THE CONTENT OF LOCAL AUTONOMY AND ITS FIELDS OF
MANIFESTATION IN THE LOCAL PUBLIC RESOURCES PLAN
There are a few studies and papers published in the science administration field that are
concerned with the subject of autonomy. However, the term of autonomy of local government is not
fully clear.
In an attempt to explain clearly the meaning of local autonomy we stop first at legal
definition which expressly enshrines the principle of local autonomy. According to art. 3 paragraph
1 of the Local Public Administration Law no. 215/2001, the local autonomy means the right and the
effective capacity of local public administration authorities to resolve and manage, on behalf and in
the interest of the local communities they represent, public affairs, under the law (see Figure no. 1):
Figure no. 1. The legal explanation of local autonomy
From the analysis of this definition one can identify two syntagmas that give substance to
the principle of local autonomy: the right and the effective capacity. Although the legal text does
not specify what is meant by these two syntagmas, we consider that they circumscribe to the two
dimensions of autonomy provided by local government Law, namely the administrative autonomy
and financial autonomy [6]. On this support, we appreciate that the coverage of the prerogatives of
the local public administration authorities can be expressed by the syntagma the right, while the
syntagma the effective capacity means the ensuring of the indispensable resources for achieving the
local administrative competences. Noteworthy is that, by its legal definition of local autonomy, the
resources are crucial to its functioning.
In addition, on the stage of the specialty doctrine one can identify ideas, conceptions and
judgments which can provide us useful explanations for understanding the meaning of local
autonomy and its role in local government.
According to the opinion that comes to us from S.C. Agunyai, S.I. Ebirim and T.I. Odeyem,
local government autonomy can be regarded as a genuine instrument for correction of the
usurpation of powers of local governments. In their paper, the cited authors tell us that the utility of
the local government autonomy lies in its capacity as a vehicle for correcting the tyrannical powers
of the central authorities over the affairs of local governments. They also argue that the highest
possible autonomy of the local administrative system will help to strengthen the powers of local
governments and will allow them to focus on the local policies than to be servants for the state. [7]
Relevant to what we want to explain at this time of our approach is the formulation offered
by D.O. Adeyemo who claims that, beyond the conflicting conceptual interpretations, the
expression of autonomy of local government is perceived as local self-government or democracy at
local level; this democracy at local level aims primarily the recognition for most people of a bigger
opportunity to participate in determining their own destiny. But, further the same author believes
that, obviously, we can not have complete autonomy or full local states; where the local
governments were completely autonomous they would have been sovereign states. [8]
From another direction, W. Enejo and A. Isa, quoting G.M. Ukertor, describe the autonomy
of local government with reference to two other expressions - paternalism and populism. The first
term – the paternalism – refers to the fact that local governments must be regularly controlled,
supervised, guided and, occasionally, punished to get to work. On the other hand, the populism
advocates and entails full local democracy opposed to any form of central interference [9].
Concisely, one can point out the conception that comes to us from J.O. Fatile and G.L.
Ejalonibu which opines that autonomy, from the conceptual perspective, seems simple in definition,
but more technical in implementation [10].
Once we explained the autonomy of local government through the meanings coming from
the specialists in the field, the attention turns towards the explanation of the fields where autonomy
Local public
administration
authorities
Law: prerogatives of the
local authorities
Effective Capacity: provision of
financial resources
solving
and
management
Local
collectivities
affaires
Autonomy
works in order to highlight the role of resources in its manifestation. An approach that serves to this
concern belongs to F.C. Okoli who believes that, in relation to other levels of government, the local
government autonomy manifests in three critical fields, as follows [11] (see Figure no. 2):
Figure no. 2. Critical fields of manifestation of the local autonomy
The authority relation between the central state government and the local one is crucial, tells
us the evoked author. This relation will determine whether we are in the presence of a
deconcentrated government or of a local government.
To rule out any possible confusions, we think that some further clarifications are required
with respect to the authority relations among different levels of government. The point is that
relations among the administrative levels can qualify an administration being as either
deconcentrated, either decentralized or autonomous.
There is deconcentration when from the central government are delegated tasks to their own
specialized structures from territory [12]. These territorial structures are under and are responsible
to the central public administration authorities, in which context one can not speak of autonomy.
On the other side, there is decentralization when to the local government are transferred
powers from the central government. In other words, by the transfer of new responsibilities to local
government authorities there is an increase of autonomy at the local communities level. It is
noticeable here that the authority relations in a decentralized administrative system emphasize the
local autonomy.
Returning to the theory of F.C. Okoli, another crucial element of autonomy are the finances.
We agree with the evoked author's assertion when he says that if the local unit has adequate and
independent sources of revenue for the initiation and execution of its functions and tasks, then the
local government works. Otherwise, when the local unit is not independent financially, then it can
not operate independently, the circumstance that affects the autonomy.
In other words, to bring out its responsibilities the local government must have own and
sufficient financial resources. Without the availability of such resources the functioning of the local
administrative system would be compromised and the intervention of central public administration
authorities would be required. In this registry, local autonomy would suffer.
Finally, according to the opinion of F.C. Okoli, the third field of manifestation of local
autonomy is the personnel. How the value of a organizational structure is given not so by the
material means, but especially by the human means, this field of manifestation of autonomy has a
vital importance. The mission of local government to serve the general interest is accomplished
with and through the human resources. An organization that depends on another organization for its
personnel can not be described as being an autonomous organization, but mostly as an extension of
the other organization, explains the cited author. In other words, the ability of a local government to
recruit, to train and to support its staff is likely to grant its autonomy.
In fact, according to the quoted author, there can be no autonomy without the consideration
of these three sectors of manifestation. Only in a decentralized administrative system where the
authority relations are not of subordination, only when local administrative authorities have
LOCAL AUTONOMY
Authority relation
Finances
Personnel
financial resources adequate to local community needs and when the local administrative apparatus
has a human potential able to manage the public affairs from administrative-territorial units, the
local autonomy works.
In summary, by the interpretation of the explanations provided by F.C. Okoli, we retain as
fields of manifestation, from the perspective of public resources, the financial and the human ones.
In addition, we believe that beside the financial and human resources, the local governments must
have also material and informational resources. The capitalization of the material goods from the
public or private property of the administrative-territorial units for solving the local public affairs
and the existence of an adequate informational system for the management of the activities from the
local government level ensure the functioning of local government, guaranteeing its autonomy.
In the background of the above, to note is the fact that the manifestation of local autonomy
may not be complete and the local administration process is not going to work without the
availability of these types of resources - financial, human, material and informational, which the
local government authorities to manage in the interest of the local community.
4. THE IMPORTANCE OF AUTONOMY AND OF RESOURCES IN THE LOCAL
ADMINISTRATION PROCESS
At this time of the approach to note is that an appropriate level of the resources - financial,
human, material, informational - available to local government institutions, as well as their
autonomy to manage them on behalf and in the interest of the local community is likely to
strengthen the capacity of local government system to achieve its proposed objectives in solving the
problems from the territorial-administrative units.
The significant role of the components local autonomy and local public resources in
ensuring the efficiency of the public administration from territorial units can be seen in the
representation of local management process in terms of inputs-outputs [13] shown in the following
figure (see Figure no. 3):
Figure no. 3. The importance of autonomy and of resources in the local administrative
mechanism
From viewing the figure, it is clear the essential role of the autonomy and of the public
resources for the good running of the affairs from the administrative-territorial units. To know
closely the real needs of the community, the local governments must have autonomy in their
Local public institutions
Autonomy
Local needs
Inputs/
Resources
Outputs/
Services
Transformation process
Efficiency
Results
Objectives
actions. Since the concrete needs of the community are known, the local governments set objectives
to meet these needs. In order to achieve the set objectives, the local public administration
institutions and authorities use resources - money, civil servants, buildings, lands, equipments,
information (inputs). Whit the help and through these resources, at the level of local public
institutions there is a process of transforming inputs. This transformation process generates outputs
in the form of provided public services. These outputs lead to results that are presented as positive
implications for the local community. The results show whether the outputs (the local public
services) respond and corespund to the needs and the issues of the local community and ensure the
achieving of the objectives which were generated by solving those issues.
When among outputs, as local public services, and resources/inputs used to produce them
there is the best ratio, we have to do with the efficiency of local government, reflecting its ability to
produce local social welfare [14].
5. CONCLUSIONS
From a retrospective direction, amid those contained in the ranks of this paper, we bring into
attention a number of conclusive ideas that finalize our approach.
First, as a result of browsing the government program that finished we concluded that the
local autonomy and the local public resources are placed in the center of the reformative concerns.
We noted that one objective of the plan of measures assumed by the former government is, inter
alia, strengthening local autonomy concomitant with increasing resources at the administrative-
territorial units level. The achieving of this objective is intended to help improve the efficiency of
public administration, in service of the citizen, as priority stated on the agenda of the reformation
process. We also found that further by Strengthening strategy of the public administration for the
period 2014-2020 it is aimed, among other things, increasing of the autonomy of the local
colectivities, strengthening the financial capacity of local public administration authorities.
Achieving of these objectives will help build an efficient public administration oriented towards the
needs of society.
Then, the highlighting of the importance of autonomy and of resources for supporting the
efficiency of local government was completed by explaining the significance of local autonomy and
its fields of manifestation in local public resources plan. As a result of the investigation of various
thesis formulated by different specialists of science administration field, we find that the assignment
of a comprehensive definition for local autonomy is not so easy. Beyond the multiple conceptual
interpretations that autonomy receives, the idea that emerges is its identification with the democracy
at the local level that allows the institutions and authorities of local public administration to self-
manage and to focus on local public issues without the intervention of the central government.
In the same registry, the examination of the manifestation fields of autonomy revealed that
the authority relations, the financial resources, the human potential are crucial to this. In addition,
we completed the list of critical sectors of manifestation of local autonomy with two other
categories of resources, respectively material and informational ones. Without these resources the
autonomy is not going to manifests completely, the local public administrative authorities being
unable to fulfill their duties, situation that endangers the functioning of local administrativ system
as a whole and, finally, generates the inefficiency of management process.
In fact, the importance of components local autonomy and local public resources in ensuring
the efficiency of government from the administrative-territorial units was showed clearly by the
interpretation of process of local administration in terms of inputs-outputs. The local government
can conduct an efficient activity only if it benefits of autonomy and if it has and uses concomitant,
by the virtue of this autonomy, inputs as financial, human, material and informational resources. All
these categories of resources are transformed into outputs consisting of public services to serve the
local community members. We are in presence of the efficiency of public administration when the
services provided are commensurate with the resources used in their production.
Overall, the conclusion that emerges from the conducted study shows that the authorities
and the institutions of the local public administration must have autonomy in their actions and must
also have public resources adequate to carry out efficiently the administrative activity at the level of
administrativ-territorial units.
ENDNOTES
1. The Governance Program of Romanian Government, Section II – Priorities, Paragraph 5,
p. 3, available online http://gov.ro/fisiere/pagini_fisiere/Programul-de-guvernare-al-
Guvernului_Romaniei-Prim-ministru-Dacian-Ciolos%28Monitorul_Oficial%29.pdf
2. Ibidem, Section III – Plan of Measures, Paragraph 3.2., p. 5
3. Strengthening strategy of the public administration 2014-2020, p. 14, available online
http://www.dpfbl.mdrap.ro/documents/strategia_administratiei_publice/Strategia_pentru
_consolidarea_administratiei_publice_2014-2020.pdf
4. Ibidem, pp. 60-61
5. Scutariu A.L., Nastase C., Comparative evolution of tourism in the North-Eastern
Region of Romania, Subcarpathia of Poland and Central Slovakia, Bulletin UASVM
Horticulture, Nr. 67 (2), 2010, p. 230, disponibil online
http://journals.usamvcluj.ro/index.php/horticulture/article/view/5164/4669
6. Art. 4 para. 1 of the Law on local public administration no. 215/2001 states: "Local
autonomy is only administrative and financial, being exercised on the basis and within
the limits prescribed by law".
7. Agunyai S.C., Ebirim S.I., Odeyem T.I., Local Government Autonomy: A Veritable Tool
for Redressing Usurpation of Powers of Local Governments by the State Governments in
Nigeria, Public Policy and Administration Research, Vol. 3, No. 10, 2013, p. 32,
available online
http://www.iiste.org/Journals/index.php/PPAR/article/viewFile/8388/8716
8. Adeyemo D.O., Local Government Autonomy in Nigeria: A Historical Perspective,
Journal of Social Scences., 10(2), 2005, p. 79, available online
http://www.krepublishers.com/02-Journals/JSS/JSS-10-0-000-000-2005-Web/JSS-10-2-
077-147-2005-Abst-PDF/JSS-10-2-077-087-2005-036-Adeyemo-D-O/JSS-10-2-077-
087-2005-036-Adeyemo-D-O.pdf
9. Ukertor G.M., The Principles and Practice of Federalism and Local Government
Autonomy in Nigeria: Reality or Mirage?, Nigerian Journal of Public Administration
and Local Government, Vol. XIV, Nos. 1and 2, 2009, p. 340, apud Enejo W., Isa A., The
imperative of local government autonomy and intergovernmental relations in Nigeria,
International Journal of Public Administration and Management Research, Vol. 2, No 3,
2014, p. 76, available online http://rcmss.com/2014/IJPAMR-VOl2-
No3/THE%20IMPERATIVE%20OF%20LOCAL%20GOVERNMENT%20AUTONO
MY%20AND%20INTERGOVERNMENTAL%20RELATIONS%20IN%20NIGERIA.
10. Fatile J.O., Ejalonibu G.L., Decentralization and Local Government Autonomy: Quest
for Quality Service Delivery in Nigeria, British Journal of Economics, Management &
Trade 10(2), 2015, p. 5, available online
https://www.google.ro/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&ved=0ahUKE
wjHjqKtievNAhUMCcAKHRMXAYIQFggmMAE&url=http%3A%2F%2Fsciencedom
ain.org%2Fdownload%2FMTEzNDZAQHBm&usg=AFQjCNG1uiaf5b2tksuCjchzeyea
M__lgA&bvm=bv.126130881,d.ZGg&cad=rja
11. Bilouseac I., Descentralizarea şi deconcentrarea în managementul serviciilor publice,
Editura Didactică şi Pedagogică, Bucharest, 2013, pp. 34-35
12. Okoli F.C., The Autonomy of Local Governments and the Place of the 4th Tier
Government (Community Government Councils) in Nigeria’s Vision 20:20:20 Project,
Mediterranean Journal of Social Sciences, Vol 4 No 5, 2013, p. 92, available online
http://www.mcser.org/journal/index.php/mjss/article/viewFile/663/686
13. Adapted by Pollit C., Bouckaert G., Public management reform: a comparative analysis,
Oxford University Press, New York, 2000, translated from English by Stanciu D.,
Editura Epigraf, Chisinau, 2004, p. 25
14. Munteanu V. A., Management public local, Editura Tipo Moldova, Iasi, 2009, p. 40
BIBLIOGRAPHY
1. Adeyemo D.O., Local Government Autonomy in Nigeria: A Historical Perspective,
Journal of Social Scences, 10(2), 2005, pp. 77-87, available online
http://www.krepublishers.com/02-Journals/JSS/JSS-10-0-000-000-2005-Web/JSS-10-2-
077-147-2005-Abst-PDF/JSS-10-2-077-087-2005-036-Adeyemo-D-O/JSS-10-2-077-
087-2005-036-Adeyemo-D-O.pdf
2. Agunyai S.C., Ebirim S.I., Odeyem T.I., Local Government Autonomy: A Veritable Tool
for Redressing Usurpation of Powers of Local Governments by the State Governments in
Nigeria, Public Policy and Administration Research, Vol. 3, No. 10, 2013, pp. 32-40,
available online
http://www.iiste.org/Journals/index.php/PPAR/article/viewFile/8388/8716
3. Bilouseac I., Descentralizarea şi deconcentrarea în managementul serviciilor publice,
Editura Didactică şi Pedagogică, Bucharest, 2013
4. Enejo W., Isa A., The imperative of local government autonomy and intergovernmental
relations in Nigeria, International Journal of Public Administration and Management
Research, Vol. 2, No 3, 2014, pp. 74-83, available online
http://rcmss.com/2014/IJPAMR-VOl2-
No3/THE%20IMPERATIVE%20OF%20LOCAL%20GOVERNMENT%20AUTONO
MY%20AND%20INTERGOVERNMENTAL%20RELATIONS%20IN%20NIGERIA.
5. Fatile J.O., Ejalonibu G.L., Decentralization and Local Government Autonomy: Quest
for Quality Service Delivery in Nigeria, British Journal of Economics, Management &
Trade 10(2), 2015, pp. 1-21, available online
https://www.google.ro/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&ved=0ahUKE
wjHjqKtievNAhUMCcAKHRMXAYIQFggmMAE&url=http%3A%2F%2Fsciencedom
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M__lgA&bvm=bv.126130881,d.ZGg&cad=rja
6. Law on local public administration no. 215/2001
7. Munteanu V. A., Management public local, Editura Tipo Moldova, Iasi, 2009
8. Okoli F.C., The Autonomy of Local Governments and the Place of the 4th Tier
Government (Community Government Councils) in Nigeria’s Vision 20:20:20 Project,
Mediterranean Journal of Social Sciences, Vol 4 No 5, 2013, pp. 89-97, available online
http://www.mcser.org/journal/index.php/mjss/article/viewFile/663/686
9. Pollit C., Bouckaert G., Public management reform: a comparative analysis, Oxford
University Press, New York, 2000, translated from English by Stanciu D., Editura
Epigraf, Chişinău, 2004
10. The Governance Program of Romanian Government, pp. 1-9, available online
http://gov.ro/fisiere/pagini_fisiere/Programul-de-guvernare-al-Guvernului_Romaniei-
Prim-ministru-Dacian-Ciolos%28Monitorul_Oficial%29.pdf
11. Scutariu A.L., Nastase C., Comparative evolution of tourism in the North-Eastern
Region of Romania, Subcarpathia of Poland and Central Slovakia, Bulletin UASVM
Horticulture, Nr. 67 (2), 2010, pp. 229-237, available online
http://journals.usamvcluj.ro/index.php/horticulture/article/view/5164/4669
12. Scutariu P., Autonomia în managementul administrației publice locale, Editura
Didactică și Pedagogică, Bucharest, 2016
13. Strengthening strategy of the public administration 2014-2020, available online
http://www.dpfbl.mdrap.ro/documents/strategia_administratiei_publice/Strategia_pentru
_consolidarea_administratiei_publice_2014-2020.pdf
14. Ukertor G.M., The Principles and Practice of Federalism and Local Government
Autonomy in Nigeria: Reality or Mirage?, Nigerian Journal of Public Administration
and Local Government, Vol. XIV, Nos. 1and 2, 2009
Lecturer PhD Cristina Maria BĂLĂNEASA
Faculty of Law and Administrative Sciences, ”Ştefan cel Mare” University, Suceava, Romania [email protected]
Abstract:
This paper aims at presenting the particularities of the day laborers on behalf of a beneficiary who works in
certain fields and requires the provision of unskilled and occasional labor.
The paper is proposing to identify the evolution of the number of day laborers and beneficiaries of areas of
activity where there have been most day laborers between 2011 (when it came into force the framework law) and by
2015, and to highlight the impact that the regulation of this type of work has on the occupied population in general.
Key words: employment relationships, day laborers, beneficiaries, rights and obligations
JEL classification: J20, J21, J22, J23, J24, J.41, J53, J62
1. ATYPICAL WORK– THE NECESSARY MEASURE FOR FLEXIBLE LABOR
AND LABOR RELATIONSHIPS IN ROMANIA
Atypical work refers to employment relationships that do not follow the standard model or
"typical" model of full-time work, performed regularly, under a contract of indefinite duration, with
one employer. The concept of atypical work covers both fixed-term employment contracts or part-
time work and temporary work through employment agency or some work forms on their own [2].
The work is atypical because its source is not the individual labor contract but the express consent
of parties derived from the special law. [3]
Amendments and supplements of legislation that followed Romania's accession to the
European Union had as a priority the flexibility of labor relations and regulation of new forms of
employment through fixed-term employment contracts, part-time employment contracts, temporary
work through employment agency, work at home.
Thus, in the context of the flexibility of working relationships, special attention was given
and granted to combat the phenomenon of undeclared employment.
In 2010, it was developed for this purpose, the National Action Plan for implementing the
National Strategy on reducing the incidence of undeclared work for 2010-2012.
The strategy materialized also through the adoption in 2011 of Law no. 52/2011 on
activities carried out occasionally by day laborers. This law leads to the flexibility and simplifies
the employment of day laborers, but also reduces the incidence of illegal employment currently not
taxed, given that in practice it turned out that undeclared work is also manifested by using day
workersunlawfully.
The law mentioned above aims to a flexible and simplified employment for day laborers for
certain activities exclusively unskilled in limited areas stipulated by law, and also reducing the
incidence of illegal employment currently not taxed. So work as a day worker represents a derogatory
regime of Law no. 53/2003 of the Labor Code, forms of employment for workers day laborers are
simplified with no need for a contract of employment and formal registration procedures at the labor
territorial inspectorates. [1]
2. IDENTIFICATION OF AREAS OF ACTIVITY IN WHICH UNQUALIFIED
ACTIVITIES ARE CARRIED OUT OCCASIONALLY
Occasional activities are explained by the legislator as those activities carried out randomly,
sporadically or accidentally, activities that are not permanent.
Therefore occasional activities might be provided in the following areas: agriculture; hunting
and fishing; forestry, logging only; fisheries and aquaculture, horticulture and viticulture;
beekeeping; livestock; performances, films and audio-visual advertising, cultural activities; cargo
handling; maintenance and cleaning activities.
3. CHARACTERISTICS OF THE EMPLOYMENT RELATIONSHIP BETWEEN
THE DAY LABORER AND THE BENEFICIARY OF THE WORK
3.1. The concrete way of setting the employment relationship between the parties. The
procedure of implementation of activities by day laborers
The employment relationship between the day laborers and the beneficiary is settled without
an employment contract, the law establishing only the need for an agreement of the two parties [1].
The day laborer is a natural person, Romanian or foreign citizen, who is capable of working
and carrying out unskilled, occasional activities for a beneficiary remuneration, the latter may be a
legal person, an authorized physical person, a family enterprise or individual enterprise for which
day laborerruns the occasional activities.
The day laborer can only be the person who is 16 years old and, exceptionally aged 15 for
whom the prior consent of parents or legal representatives is required as a protection measure of the
rights to health and safety at work, the activities performed by day laborers aged up to 18 years
must be suitable to their physical development[3].
Under the law, the duration of the occasional activity that can be exercised is of minimum
oneday corresponding to 8 hours of work. A daily work of a day laborer shall not exceed 12 hours
and for underage workers that are able towork 6 hours per day. If the parties agree fewer hours of
work, work payment for day laborers will be the equivalent of at least 8 hours of work.
It notices that the activity of the day laborer for the same beneficiary was limited in the sense
that ‘the day laborer’s activity cannot be performed for a period longer than 90 days cumulated
during a calendar year’[5].
We believe that unless the legislature had established this limit, many beneficiaries would
not have been tempted to engage workforce under a typical contract of employment and might have
abused of their right to use the activities provided by day laborers.
The day laborer cannot be used by the beneficiary for an activity to a third party’s benefit.
3.2. Enumeration of rights and obligations of the beneficiary and of the day laborer
The beneficiary has the right to determine the activities to be undertaken by the day laborer,
the place of performance and the duration of the activity. The beneficiary will also exercise control
over the way in which the work is performed.
The obligations of the beneficiary are [5]:
a)To set up and complete a Registry record of day laborers and keep it at his headquarters,
its model being regulated in the framework law;
b)To present the Registry to the competent bodies of control;
d)To inform the day laborer on the activity he carries out daily, the risks and dangers he is
exposed to, his rights and obligations;
e)To pay the day laborer the remuneration at the end of each work day;
f)Toprovide at own expense protective work equipment that is necessary due to the nature
and the specific of the activity carried out by the day laborer;
g) To pay the income tax due for the work done, the amount of the tax is the one of 16%
calculated on the gross remuneration;
h)To record in the Registry, in a chronological order, all day laborers that work.The Registry
shall be completed daily, while using day laborers. The beneficiary shall submit monthly, no later
than the 5th of each month to the Territorial Labor Inspectorate from the place of his headquarters,
an extract from the record Registry comprising records from the previous month and the Labor
inspection will centralize the data submitted at the national level.
Day laborers’ activity does not confer quality of insured person in the public pension system,
unemployment insurance system and any system of health insurance. This could conclude the
optional health insurance and / or retirement. For incomes obtained from work performed by day
laborers are not due social security contributions or by the day laborer or the beneficiary.
Day laborer’s activity does not confer the one in question the right to insurance in the public
pension system, in the unemployment insurance system or in the system of health insurance. The
day laborer could conclude optionally a health and / or retirement insurance. Neither the day worker
nor the beneficiary has to pay social contribution for the income obtained from the activity
performed.
As for the rightsof the day laborer, he is entitled to a remuneration determined by direct
negotiation between the parties and the amount of gross remuneration scheduled per hour
established by the parties ‘cannot be lower than the hourly wage of minimum gross payment
guaranteed and shall be made at the end of each working day or weekend before signing the register
by the day laborer and the beneficiary [5].
Currently, considering that the gross minimum wage in Romania increased from February 1,
2017 to 1,450 lei, day laborers are paid at least 8.735 lei per hour. For example, if day laborers
work 8 hours theirgross remuneration at the end of the day will be 69.88 lei. The proof of payment
of the remuneration is made by day laborer’s signature in the Registryrecord.
4. STATISTICAL OVERVIEW ON THE ACTIVITY OF THE DAY LABORERS AT
NATIONAL LEVEL OVER THE PERIOD 2011-2015
We have to mention that we do not find much statistical information on the work day
laborers or the number of beneficiaries using their labor force. But Labor Inspection centralizes
summary information sent from the territory on these aspects following the publication each year of
the Labor Inspection Activity Report.
The institution has the obligation to prepare and publish this annual report under the
provisions of article 5 of Law no.108 / 1999.
Table no. 1. Number of legal entities that bought/sent the Registry record for day laborers
and number of recorded positions
Date and
year No. of legal entities
that bought the
Registry record
Legal entities that sent a copy
of the Registry record Number of recorded positions
31.dec.11 8324 4868 2342010
31.dec.14 27887 21134 19.891.662
31.dec.15 31334 24182 18984693 Source: processed date from Labor Inspection
Figure no. 1. Number of legal entities that bought the Registry record for day laborers (2011-
2015)
We notice from Figures no.1 - 2 that from 2011 to 2015, the number of people who have
purchased and sent to labor inspectorates the Registry record for day laborers witnessed a
downtrend, meaning that the beneficiaries call more often this form of performance despite
undeclared work.
Figure no. 2. Legal entities that sent a copy of the record Registry of day laborers (2011-2015)
As for the number of positions recorded in the register of daily workers, 2015 saw a
downward trend compared to the years 2011 and 2014, which may show that day laborers were
used by beneficiaries for longer periods to a maximum of 90 days.
Figure no. 3. Number of positions recorded in the record Registry of the day laborers (2011-
2015)
We mention that the number of 18,984,693 positions is not equivalent to the total number of
laborers for the five years (2011-2015) as a day laborer may be evidenced in several positions in the
register, taking into account that a person can carry out unqualified occasional work for the same
beneficiary during a period of no more than 90 cumulative days during a calendar year. Such a day
laborer may be registered in the record Registry of the same beneficiary at several positions.
Table no. 1. Distribution by activity of the day laborers recorded at the national level
(2011-2014)
Source: processed data from Labor Inspection
When referring to the distribution by activity of day laborers registered at the national level
over the period 2011-2014, it is found that in 2014 compared with 2011, the number of day laborers
increasedfor all fields of activity (Table 2).
We note that the Agriculture ranks first in the number of day laborers, followed by Forestry
and Horticulture and Viticulture is the third area of activity.
CONCLUSIONS
The management of the undeclared work has become a priority for the European Union
countries and therefore for Romania. Thus, Law no. 52/2011 was adopted to regulate the types of
Area of activity December 31,2011 December 31, 2014
Agriculture 891.967 4.615.555
Hunting and fishing 4.942 60.191
Forestry 305.681 2.654.123
Fisheries and aquaculture 8.776 40.182
Horticulture and viticulture 473.225 2.641.624
Beekeeping 4.574 11.623
Livestock 59.515 319.272
Performances 96.847 696.021
Cargo handling
94.690
700.564
Maintenance and cleaning 132.235 911.892
Undefined 269.558 -
Total recorders 2.342.010
12.651.047
work and for keeping good records of day laborers by fields of activity. We noticed that not all
areas of the national economy can resort day laborers, but analyzing the data above, we can
conclude that the current legal framework governing the work of the day laborers led to a
significant increase in the number of staff employed in the labor market, but raised a number of
issues of implementing that address health and safety of the day laborers, protection of minors
engaged in work laborer, areas in which unskilled occasional work could be used.
We also found that the type of Register set by the legislature and the methodological norms
allow registration in several positions of the same day laborer, so it is impossible to identify the
exact number of laborers recorded because this register allows the same person to appear in the
beneficiary’s Register several times in a month or a year. We consider appropriate to amend the
methodology for recording and transmission of data on day laborers, precisely to identify easier the
total number of employed population in Romania for a reference period.
However, we note that the legislation of such labor by day laborers increases the
employment rate among the unqualified population; it facilitates personal income and also incomes
to the state budget, exempts from contravention those people who would use illegal labor in the
absence of such regulation.
BIBLIOGRAPHY
1. Bocean, Claudiu George Work of Day laborers, Work relations, no. 5/2012
2. Guga, Ştefan (2016), Atytipical Work in Romania .An overview from the crisis inRomania,
The Project‘Approaching the challenges posed by new labor legislation and social dialogue
in Romania’, Bucharest;
3. Ţiclea Alexandru (2016), Employment Law Treaty, Universul Juridic Publishing House,
Bucharest;
4. Law no.108/1999 on labor inspection
5. Law no. 52/2011 on the exercise of occasional activities carried out by day laborers
6. https://www.inspectiamuncii.ro/documents
Lecturer PhD Aniko Noemi TURI
Catholic Institute, Faculty of Business Studies, Ljubljana, Slovenia [email protected]
Abstract:
Contemporary human resource management practices often ignore very important values of international
labour law; however there is a wide floor for improvements in this area. In this sense the main guidelines are arising
from the legal acts of the International organizations. The social responsibility, professional ethics and management
are categories which have the intense relation with the legal system. Some historically developed degree of social
responsibility and professional ethics may be considered as an important resource of values which are the starting
point for building the legal system and also international regulations. The international labour law principles are
significant elements in employment relations. The paper represents how the principles of the international labour law
can positively influence managerial strategies through the social dialogue. Social dialogue provides a communication
platform between social partners and by that it is actually creating a socio-economic and social development.
Furthermore social dialogue is a key instrument in planning social development, harmonizing different interests,
prevent and resolve disputes between the management and labour. International law shows many ways how to
strengthen the principle of ethics in the employment relations. The values, arising from the existing international legal
documents may be the significant guideline for the development of “good practices of managers”.
Key words: labour law principles, employment relations, social dialogue, values, human resource management
JEL classification: K31
1. INTRODUCTION
The appearance of the unpredictable environment caused by the constant social, political
and economic changes, it puts inevitably the management in the position of decisive search of new
managerial ways for improving their professional performance. The communication between
employees and employers represented by the management has been continuously changing as well.
Therefore the recognition of the importance of the adoption of new managerial practice is
increasingly acknowledged. The social responsibility, professional ethics and management are
categories which have the intense relation with the legal system. Namely the social, political and
economic order of a single state in some historical period determines decisively the rules and the
characteristics of the legal system of a single country. And these are not just the characteristics of
the single country but also the characteristics of the international law. Some historically developed
degree of social responsibility and professional ethics may be considered as an important resource
of values which are the starting point for building the legal system and also international
regulations. The international organizations confirm those values by enacting the international rules
and regulations. In this process many times happens that national or international legislators build
in the regulations modern solutions proposed by science. In this sense they add to the regulations
some added value. The added value in such cases is a clear presentation of new possible paths in
straightening and developing the values which where the reason for the regulation of a specific
issue. The main purpose of this paper is to present the results of the legal research of the dimension
of the legal tools which may be used by management in order to straighten the relationship between
the employers and management and the employees in order to provide better work productivity on
the one hand and better conditions for the employees on the other hand. A social dialogue may be
considered an adequate tool in such attempts. The social dialogue may be beneficial to the social
partners if it is based on the international standards that are identified and implemented in the legal
systems of the contemporary states.
The presumption which is supposed to be verified through the research is that, international
law gives the managers many new possibilities to develop and improve their competences and
foster a normal, ethical relationship between the employees in regard to better human resource
management by the value added regulations. The goals of this area of management are to develop
the knowledge and skills of such treatment of working stuff that will lead to high success of the
work unit and to the high living and working conditions of the employees.
In accordance with the previously mentioned purpose of the paper, the main goals of the
research are the following: to establish which are the international organizations that create law
about the labour relationships in modern societies; to identify the legal acts which may be
considered main resources of the legal regulations and guidelines for managerial activities for the
successful human resources management; to identify international law regulations and guidelines
thatcan be recommended for wider use in the managerial practices in order to improve the
employees’ motivation for the effective and creative professional work.
In the process of research the applied research methods, which are often used in legal
research were the analysis, classification, and legal argumentations of main managerial mistakes in
the human resources management practices seen in the light of the values arising from international
law. The level of knowledge and skills in this area vary significantly in different surroundings,
which may have negative influence to the motivation of the employees. Therefore the international
standards arising from the international law may be considered as important tool, which proposes
the high standards and secures more equal treatment of the employees. From this point of view the
research analyses the regulations of International Labour Organization (ILO). The models of
managerial behaviour according to this act should certainly be considered as ethical and supporting
social responsibility of work units. Similar conclusion may be made for the full implementation of
the values arising from the legal acts of the European Union and the Council of Europe.
The conclusion of the research is that the recognition of the importance of the adoption of
the new managerial practice has been increasingly acknowledged. Consequently, the main result of
the research supports the thesis that contemporary human resource management practices often
ignore very important values of international law and that there is a wide floor for improvements in
this area. In this sense the main values arising from the legal acts of the United Nations, the
International Labour Organization, the Council of Europe, the European Union, and the
Organization for Economic Co-operation and Development are presented.
2. BASIC LEGAL ISSUES OF THE MANAGEMENT AND LABOUR
The research of possible human resource managerial approaches focuses on the main
principles of the international law which may be considered as the resource of new values,
important for the human resource management’s efforts. On such way the research approaches the
added values of the international regulation of the social dialogue and the social partnership
between the employers or managers and employees. In the research some crucial points of the
human resource management will be emphasized regarding the ethical employment practices and
the international regulations. The economic instability put the managers in the situation of intense
search for the new strategies in relation with the surroundings of the enterprise and in relation with
the employees. On one side the working relationship is largely based on trust, and especially in
smaller companies, already approaching the level of confidence most likely as those of the family.
On the other side the trends of building the “flexicurity” demand less personal approach to the
phenomenon of employment relationship and more intense intervention of the state in employment
relations, including strict surveillance of the execution of the employment relation regulations. This
policy of flexicurity attempts to combine flexibility of labour markets for employers and security
of employment for employees (Foundation Findings, 2007). There is an essential question to be
applied is which parties should undertake the main responsibility, state, employer or employee for
ensuring both security and flexibility? It supposes to be shared between all partners involved in all
levels for a successful advance.
Thus the period of economic crises the management should not incline to search the savings
in expenses for the labour force. Actually this might be the normal reaction on economic problems
if only such measures are executed in proportion to other measures which costs bear the employer.
Ignoring this principle and putting the burden of savings only on the employees’ shoulders, such
approach may seriously diminish the motivation of the employees. The short term effects of
savings regarding to labour costs may be positive, however on the long run the effects would
probably endanger the productivity of the enterprise. The lower motivation of the employees may
lead to the appearance of the collective labour disputes, to the appearances of strikes and the other
industrial actions, and to the assessment of the liability of management for the violation of
employees’ rights. This might cause several potential differences and tensions among employees
and employers, which will lead straight towards to the labour disputes. For trying to avoid the
labour disputes, firstly employees and employers both must be thoroughly enlightened upon their
rights. Both on the international and national level there are many fundamental legal backgrounds
that are providing employees’ and employers’ rights as well.
The freedom of association of citizens is guaranteed by all modern constitutions. To form
the trade unions and to join or not to join the union is therefore an individual right of the employee.
Right to trade union freedom is a fundamental human right and was already regulated in the
General Declaration of Human Rights in 1948 (UN), in the International Agreement on Economic,
Social and Cultural Rights (UN) and in the European Convention on Human Rights (Council of
Europe). The Trade Union freedom is defined in the second part of Article 5 of the European
Social Chart (Council of Europe). It means that all workers and employers have the right to
freedom of association in the local, national and international organizations for the protection of
economic and social interests. Trade Union rights are regulated by the ILO Convention No. 87 on
Trade Union Freedoms and the Protection of Trade Union Rights, the ILO Convention No. 98 on
Application of the Principles of the Right to Organize and Collective Bargaining as well as by the
national employment legislation and other legal provisions. In the case of violations of trade union
freedom procedural regulations are important: namely regulations about the labour and social
courts and regulations about the arbitration. Violations of the employees’ right to participate in the
management and violation of trade union rights are usually defined in penal legislation defined as a
criminal offence against the employment relations and social security. According to the elementary
issues concerning the personal scope of labour law protection, four significant ILO Conventions
should be mentioned: ILO Convention No. 95 on Wage Protection, No. 183 on the changes to
Maternity Protection from 1952, the No. 174 Prevention of Major Industrial Accidents and the ILO
Protocol to the Security and Health at Work Convention. The ILO Convention No. 95 on Wage
Protection is one of the most important conventions, which regulates basic rights of the workers
arising from an employment relationship, as well as the fundamental obligations of the employer
towards their workers. ILO Convention No. 183 on the changes to Maternity Protection from 1952
is providing more security and additional rights to pregnant women and breastfeeding mothers.
In ILO Convention No. 174 Prevention of Major Industrial Accidents and the Protocol to the ILO
Convention No. 155 similar issues are concerned with recognising the risk of major accidents,
reporting to the authorised bodies and specific obligations of the employer on the company level
(Tičar, 2010).
To gain adequate labour standards and an appropriate level of salary as well as other rights,
workers may be often forced to exercise the right to strike. This is a right for an industrial action,
which is threatened or taken by party to protect and promote its interests (Arrigo and Casale,
2005). Strike is an organised stoppage of work by workers, with the purpose of exercising
economic and social rights and interests arising from work. The right to strike is commonly
recognised as civil and human right. Legal strike is a strike which is pursued according to the law
and other legal standards. The International Labour Organization (ILO) was the first international
organisation, which emphasised the freedom of association and the right to strike. Right after the
Second World War, the International Labour Organization started preparations for two conventions
which led to acknowledge the basic principles of the named freedom; Freedom of Association and
Protection of the Right to Organize Convention, ILO Convention No. 87 and Right to Organize
and Collective Bargaining Convention, ILO Convention No. 98.
The European Convention on Human Rights of the Council of Europe that is the highest
political body of the EU recognises the basic principle of the right to strike, when the details we can
find in European Social Charter. The Article 11 of the European Convention on Human Rights
says: “Everyone has the right to freedom of peaceful assembly and to freedom of association with
others, including the right to form and to join trade unions for the protection of his interests.” But
the outcome of these freedoms may cause possible expansion of the negative freedom of association
and the expansion of the right to bargain or the right to strike (Alston et al., 1999). The strike is
illegal when there is a discrepancy between the object and consequences of the strike action. All
disproportionate, unnecessary and unsuitable actions of the workers taking part in a strike are
forbidden, when there is a discrepancy between the cause of the strike and the assets of the
employer. Regarding the possibility that there can be results of security threats and cause of
damage, the whole procedure of the strike has to be clearly specified and transparent. The first
serious irregularity during the strike causes that the strike as a whole is illegal since it started till the
interruption. The right to strike is a right of employees (Block, 2003). Nevertheless the strike may
have been organised by trade unions. Because of its nature workers have a right to organise strike
outside of trade union context. European Social Charter (adopted in 1961 and revised in
1996)provides for all workers the right of industrial action, regardless with trade union organization
or supported by them. European Social Charter provides the right to organise with a view to ensuring
or promoting the freedom of workers and employers to form local, national or international organ-
isations for the protection of their economic and social interests and to join those organisations.
Notwithstanding that strikes cause great economic damages, not only in one company or branch of
the economy, but also in economy as a whole, for that the strike is supposed to be »ultima ratio« to
protect collective rights. The strike is a legitimate and legal stoppage of work (Atlas et al., 2000),
when and only conducted according to the legal standards. The obligation to give prior notice to the
employer before calling a strike is necessary to prevent greater damage for the employer; also in the
sense to allow the parties to seek a negotiated solution as well as to inform the public (especially
important with strikes in public services and state administration). The restrictions of strike action
(ILO, 2006) are permissible under the strict interpretation and consideration that the strike action is
an important fact to assert and protect worker’s social and economic rights. As it is evident, even
the actions of strike supposed to be ethical towards both of the parties. From the side of the
employee representatives as the above mentioned prior notice to the employer is consequential such
as how the employer ought to be open for a negotiated agreement.
2.1 PROHIBITION OF DISCRIMINATION IN EMPLOYMENT
The Community Charter of the Fundamental Social Rights of Workers recognises the
importance of combating every form of discrimination, including the need to take appropriate
action for the social and economic integration of elderly and disabled people. The right of all
persons to equality before the law and protection against discrimination constitutes a universal right
recognised by the Universal Declaration of Human Rights, the United Nations Convention on the
Elimination of All Forms of Discrimination against Women, United Nations Covenants on Civil
and Political Rights and on Economic, Social and Cultural Rights and by the European Convention
for the Protection of Human Rights and Fundamental Freedoms, to which all Member States are
signatories. Convention No 111 of the International Labour Organisation (ILO) prohibits
discrimination in the field of employment and occupation. The International Labour Organization
since its foundation has been committed to promoting the rights of all women and men at work and
achieving equality between them. The ILO vision of gender equality recognizes this goal not only
as a basic human right, but intrinsic to the global aim of Decent Work for All Women and Men. The
principle of non-discrimination in employment is a global principle. In the Article 1 of ILO
Convention No. 111 on Discrimination (Employment and Occupation) says that »for the purpose of
this Convention the term discrimination includes: (a) any distinction, exclusion or preference made
on the basis of race, colour, sex, religion, political opinion, national extraction or social origin,
which has the effect of nullifying or impairing equality of opportunity or treatment in employment
or occupation«;Article 3 of ILO Convention No. 111 highlights the importance of cooperation of
employers' and workers' organizations to foster enacting such legislations, promoting educational
programmes to base the acceptance and survey of the Convention’s policy. In the Article 10 of the
Treaty on the Functioning of the European Union contains as well the prohibition of discrimination
such like in the EU Charter of Fundamental Rights. Directive 2000/78/EC establishes a general
framework for equal treatment in employment and occupation. Many of the European Union Court
of Justice cases are related to discrimination on grounds of age, disability discrimination and
discrimination based on sex that concerns the issue of (un)equal treatment between women and
men.
2.2. COLLECTIVE DISMISSAL
The economic crises put the managers in the situation of intense restructuring of the
enterprises and economy that are also connected in several ways to the collective dismissal of
employees. According to Article 1 of Directive 98/59/EC, »collective redundancies` means
dismissals effected by an employer for one or more reasons not related to the individual workers
concerned where, according to the choice of the Member States, the number of redundancies is:
either, over a period of 30 days at least 10 in establishments normally employing more than 20 and
less than 100 workers, at least 10 % of the number of workers in establishments normally
employing at least 100 but less than 300 workers, at least 30 in establishments normally employing
300 workers or more, (ii) or, over a period of 90 days, at least 20, whatever the number of workers
normally employed in the establishments in question« (EUR-Lex, 2016). These issues search for
the new strategies in relation with the surroundings of the enterprise and in relation with the
employees of what protection should be guaranteed to the employees. Within the European Union’s
Directives there are three directives concerning the collective dismissal: Directive 2008/94/EC,
which was previously 80/987/EEC, 2001/23/EC, previous directive 77/187/EEC and 98/59/EC
previous directive 75/129/EEC. Directive 2008/94 establishes the guarantee institution and
strengthens the protection of the employee’s claim in case of insolvency of the employer. Directive
2001/23 ensures that the rights of employees are safeguarded in the event of a change of their
employer by enabling them to remain in the employment with the new employer under the same
conditions and terms of the employment contracts. Last but not least the Directive 98/59 established
the information and consultation procedures between the employer and workers’ representatives,
the cooperation of the employer with employment service and to mitigate social consequences of
redundancies. In Article 2 it says that »employer is contemplating collective redundancies; he shall
begin consultations with the workers' representatives in good time with a view to reaching an
agreement. These consultations shall, at least, cover ways and means of avoiding collective
redundancies or reducing the number of workers affected, and of mitigating the consequences by
recourse to accompanying social measures aimed, inter alia, at aid for redeploying or retraining
workers made redundant« (EUR-Lex, 2016). To sum up, the purpose of the above mentioned
Directives guarantee that the restructuring processes will not have a negative effect on employees.
3. SOCIAL DIALOGUE AS THE KEY FOR ETHICAL EMPLOYMENT
RELATION
Social dialogue is often referenced as one of the key factor of enterprise success. That is
evident that in the present challenging economic conditions discussions within the social partners
do not lead to a shared understanding. There is no doubt that this difficult economic situation
inevitably complicates the process of achieving consensus between the social partners. From this
point of view modern society today faces the question whether to support the centralized or
decentralized collective bargaining (Trebilcock, 1994). Some scholars are emphasizing the
importance of negotiations at the company level which is primarily the result of demands for
greater flexibility as well as of the realization that the market is becoming more and more
differentiated and thus better acclimated to by singled-out companies. Unarguably the main finding
is that the decentralization is a process that enables higher flexibility, especially in the view of the
salary system as well as in views of other labour and organizational conditions, in adapting to the
specifics of various companies and their needs deriving from their positions in the market. This
provides more room for independent leadership of corporate business politics, which in today’s
conditions of fast paced economy changes and a highly competitive market, need to be flexible.
Nevertheless, there is an enormous need for a successful social dialogue concerning the negotiated
agreements especially in case of vast flexibility options. From the workers’ interest working
arrangements are considered in workplace and private life balance, such as reconciling care and
other work arrangements (Plantenga and Remery, 2005; Anxo and Boulin, 2005). The above
mentioned is especially important for the rewards system and other measures connected to the
human resources management field. However it is important that the decentralization process is
somehow limited, especially when it comes to wage negotiations, mainly due to the need to keep
wages for similar work positions balanced and similar. On the other hand, the centralization of
collective negotiations, on national and lower levels, can contribute to a higher ratio of collective
contracts, enable the evolution and empowerment of the doctrine of participative management of
organizations and at the same time boost the negotiating power of worker’s unions. Although
ecognizes and ecognizes d social dialogues differ, various flexibility options, such as
contractual and working time flexibility are mutually a crucial point both for the workers and the
company concerning the collective agreements. The social dialogue presents an expression of the
democratization of society (Cohen and Arato, 1994) as it ensures the cooperation of social partners
in forming and implementing law in the field of economy and social politics. Its other main value
is that it is based on some of the main principles of democracy, such as inclusion, cooperation,
striving for a consensus and inclination to reaching a compromise. Thus social dialogue is
providing options for solving the problems and differences that exist between capital and labour
and by that is ensuring social peace and opening options for harmonized economic and social
development. Hence, social partnership is based on the willingness to compromise. There is a
common sense of purpose in relation to the urgent need to restore confidence and stability. There is
also a shared interest in seeking to maintain employment across the economy and for example, in
ensuring a swift return to the labour market by those who have lost their job. Social dialogue
enables social peace in a country, therefore providing the necessary conditions for a stable
economy as well as a balanced social security of the people; therefore the social dialogue should be
taken into consideration in parliamentary lawmaking procedures. It is important to emphasize that
the social dialogue, two partite and three partite, is based only on consensus, without any
regulation.
A high level of consensus can thus ensure a high level of social dialogue. Promoting
flexibility, ecognizes work practices and managing change have been extensively addressed
over the course of social partnership agreements in the European Union. Industrial relation systems
in the EU are very diverse therefore difficult to compare, but one of the greatest benefit of the EU.
There is no doubt that general social interest demands not just any but a high quality social
dialogue. In order to ensure a social dialogue of very high quality two conditions need to be met.
The first is that the dialogue must be conducted at the highest possible professional level and the
second condition is the involvement of representatives of all social groups and subjects affected.
The EU level legislation had a positive impact for the Member States. The development of
European policy and practice, reflected in the legislation of the European Union in the area of
employment rights. The framework of the EU Directive on information and consultation of
employees ecognizes and respects the tradition of social dialogue at the Member State level. It
has even higher importance that modern state supports and enforces the social dialogue even
furthermore now, when Europe and the whole world has been plunged deeper into the economy
and financial crisis. The social partners must now, more than ever, work together and strive to seek
out new solution that will soften the impact of the crisis on economy, financial and social areas.
Social partners have to commit to discussion aimed at agreeing national-level arrangements in
accordance with the Directive. A social dialogue provides opportunities for discovering and
undertaking measures which will benefit both employers and workers’ unions as well as mitigate
the effects of the current economic situation, strengthen social peace and provide for a harmonized
socio-economic development, which is the goal of various international regulations as well as the
Lisbon strategy. The ability of both sides of the dialogue to be willing to adapt and strive for a
compromise is very important. The employers also have some instruments that enable them to put
pressure on worker’s unions at their disposal. Due to the reasons of high significance that
collective contracts include rights of workers’ unions, will ensure them an undisturbed activity and
affectivity.
5. THE ROLE OF THE SOCIAL PARTENRS
One of the main goals of this part is to show how important position and role the social
partners have to foster a better work environment. Concerning the European labour market, the
Commission set up some significant objectives. For its “adaptation requires a more flexible labour
market combined with levels of security that addresses simultaneously the new needs of employers
and employees” (Eurofound, 2010). It might involve the change from job security to employment
security for workers and the eventuality for companies. For achieving this target, trade unions are
indispensable. That is the reason why human resource managers supposed to know the structure
and consistence of trade unions for an ethical and fruitful social dialogue with the social partners.
Trade union is basically an organization, which is a correlation between the system of power and
the system of communication. Trade unions (similar as societies) can have legal capacity, or not.
On the basis of international conventions, especially ILO Convention no. 87, the state is eligible to
link recognition of legal personality with registration and deposit of the statute with competent
national authority. Under Article 5 of ILO Convention no. 87 workers’ (and employers’)
organizations have the right to affiliate on international and regional level. Employers also affiliate
with associations (on the basis of the right to affiliate) in order to their interests to be institutionally
represented. The majority of European employers’ associations have more than a hundred year old
tradition. They have been formed as a response to trade unions’ pressures and for protection from
trade unions. The other reason for the creation of employers’ associations results from the
restriction of mutual market competition.
The development of employers’ associations was stimulated also by the social and political
changes. With its basic act (statute) the trade union defines bodies, their field of work and mutual
relations, compositions of the bodies, number of members and quorum, manner of voting and
nomination, termination of office, rights and duties, duration of the term of office of body,
representation and provision of their work, conditions under which an individual may become a
member of the trade union and when and how the membership terminates. The models of European
employers’ associations differ. They cross from extreme liberal – decentralized to binding –
centralized. These organizations have formed special federations or confederations on international
universal and regional level, which represent the interests of employers in various fields.
Employers are organized according to the branch or territorial line. Branch associations join
employers according to the predominant business of the company. Territorial associations include
companies of various businesses, on regional, country or other local geographical unit level.
Employers’ organizations also differ according to the management – centralized or decentralized.
Regardless of the type, the most important assignment of employers’ organizations is negotiation
with the trade union and conclusion of collective contracts. The objectives of employers’
associations are in particular reduction of taxation for companies, uniform stimulating working
conditions for all companies, reduction of labour costs and greater flexibility of workers. We can
state that freedom of trade unions is important in the light of both individual rights of workers as
well as collective rights of trade unions, because of the vast legislative regulation (Bamber et
al.,2004) of this freedom in international, as well as national legal sources. Industrial relation
systems and their development play an important role in determining economic and social
progress.
6. LEGISLATIVE DEVELOPMENTS
The economic cries had a deep effect on the legislative programme at the EU level as well.
Concerning the legislative programme, the most important areas were the parental and maternity
leave, working time, workers’ right and the liability. Other international and European acts also
contain regulations of trade union’s freedom to act and similar regulations that ensure certain level
of protection of trade union rganizations and their bodies. Just a few to be mentioned are
European Social Charter, Charter of Fundamental Rights of the European Union, European
Convention for the Protection of Human Rights and Fundamental Freedoms, International
Covenant on Economic, Social and Cultural Rights, International Covenant on Civil and Political
Rights, Universal Declaration of Human Rights. As it was already mentioned beforehand
concerning the international legislation level, the ILO Convention no. 87 concerning freedom of
association and protection of the right to organize defines the rights of trade union rganizations,
among others the freedom to act and the right to establish and join federations and confederations
on an international level. The aim of ILO Convention no. 98 concerning collective bargaining and
the right to organize, is to prevent mutual interference of worker’s and employer’s rganizations,
to protect workers from anti-union discrimination in respect of their employment, and to promote
the development of voluntary collective bargaining for regulation of working conditions in context
of national jurisdiction. ILO Convention no. 135 concerning protection and facilities to be afforded
to workers’ representatives in the undertaking should also be mentioned, as on its basis workers’
representatives enjoy special protection in a company. According to the liability for damages, the
general rule is that employee liability, unlike employer liability, arises in the case of faulty conduct
by the employee and with limitations, which means that only the actual damage caused must be
repaid and not the lost profit. In spite of this general rule, if certain legal requirements are met, the
employee liability arises regardless of whether the employee is at fault (strict liability/objective
liability) but only in exceptional cases. Worker’s representatives’ liability for damages is defined
by the regulations concerning the legal position of companies, which states that workers’
representatives in supervisory boards are responsible for the damage caused, if they did not act in
due care or they did not protect the professional secrecy of the company. That is why the European
Parliament co-operated in attaining an end and in 2009 adopted a resolution calling on the
European Commission to take action to draft a legal instrument introducing join and several
liabilities to deal with the cross-border dimensions of subcontracting, as well as adopting the report
on the statute for a European private company (McKay, 2009). In this context of joint and several
liabilities, the effort was to guarantee that a common enforcement system should be applied
leaving out of consideration the differences of legal and industrial relations cultures in the Member
States.
In the relation of Directive 2001/86/ EC of European company statue with regard to the
involvement of employees, it “aims at creating a uniform legal framework within which companies
from different Member States should be able to plan and carry out the rganizations of their
business on a Community scale” (EUR-Lex, 2016).Regarding to social dialogue developments,
within the intersectoral social dialogue, in 2009 a revised framework agreement was signed. It was
historic, because it was the first time when social partners had revised their own framework
agreement to ensure the revision of the framework agreement on parental leave. Directive
96/34/EC, concluded by general cross-industry organizations of UNICE, CEEP and the ETUC,
lays down minimum requirements designed to facilitate the reconciliation of parental and
professional responsibilities for working parents. In relation to maternity leave, Directive
86/613/EEC reached its revision by the social partners’ framework agreement of 18 June 2009,
which allows self-employed female workers to have the same access to maternity leave such like
salaried women workers and helps spouses to obtain the same social assistance as officially self-
employed workers. The term of “European social partner” refers explicitly to those rganizations
at the level of European Union (EU), which are active in European social dialogue. EC Treaty
requires EU to promote dialogue between employers and workers. Treaty of Lisbon has supported
the promotion of social dialogue even more so. The EU recognizes and encourages the role of
social partners at the European level, taking into account the diversity of national arrangements
however all the main social issues are excluded from the jurisdiction of EU (such as wages, the
right of association, strike and lock-out. Nevertheless, they are extremely important for promotion
of social dialogue in Member States. Social partners have so far successfully developed the
framework agreements, which regulate issues of maternity leave, part-time work and work for a
limited time.
6. CONCLUSION
The constant changes in the economic, political and social environment led to an increase in
unemployment in all EU Member States, which put the social partners, especially the management
in the position to seek new ways to improve their performance within the ethical frame. These
efforts are in a great part directed by the human resource management. The execution of this
managerial function lies on the ground of employment legal regulation and legal regulation of
social dialogue or post-industrial relations. The presumption of the research was verified that
international law gives the managers many new possibilities to develop and improve their
competences and foster a normal, ethical relationship between the employees in regard to better
human resource management by the value added regulations. The research of the legal framework
of the managerial competence is that the global economic downturn leads to changes of the
managerial duties and competences. In this period managers are under the pressure of the new
duties in the relation to the state and the society. International law as the main resource for the
improvement of managerial strategies shows many ways how to strengthen the principle of ethics in
the employment relations. The values, arising from the existing international legal documents may
be the significant guideline for the development of “good practices of managers”. According to the
ethical principles of human resource management, the managers may develop a more effective
policy of introducing employees’ participation in decision making, support of trade unions and their
actions. The research confirms that the values which may be considered such guidelines can be
identified in the European law as well as in the law of the universal international organizations,
especially the International Labour Organization (ILO). It is the law regarding both types of the
employees’ representatives, namely the trade unions and the employees’ elected representatives. All
these activities may be observed as a specific area of human resource management in a specific
works unit. In the same time the standards which arise from management activity in this area,
present the frames of the industrial and how to ameliorate employment relations by strengthening
the role of employee representatives and managers' attitude towards open communications. All
these factors confirm the impact of the international labour law principles on fostering ethical
employment relationship.
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PhD Candidate Elisabeta SLABU University of Bucharest, Romania
Abstract:
The provisions of the Lisbon Treaty highlight that, at present, the Union has as objectives, not only an unitary
economic development, but also strengthening the observance of peoples' fundamental rights, hence, implicitly, the
right to good administration. The Court of Justice of the European Union has analyzed over time, in its decisions, the
emergence and development of the good administration principle, its fundamental elements, and impossibility of
framing it clearly in a definition, and, not least, turning the principle of good administration into a fundamental right
through the Charter of Fundamental Rights of the European Union. At European level, citizens of the EU member
states, but also those from third countries thus benefit from a right to good administration in the relations with
European Union institutions and bodies, according to Article 41 of the Charter of Fundamental Rights of the European
Union. The same should be the proceeding at internal level. Each Member State of the European Union should concern
itself about identifying and promoting the most adequate measures for ensuring good governance and good
administration. By identifying and applying at national level the principles governing the public administration activity
at European level can be created the requisites for a national public administration that is transparent and efficient,
close to the needs and interests of its citizens and that could be considered an integral part of the European public
administration.
Key words: right to good administration, the European Union, the CJEU case-law, the Charter of Fundamental
Rights of the EU, European public administration, common standards of the public administration.
JEL classification: H63, J18, K23, K38
1. A SHORT INTRODUCTION
In the European states, the process of modernizing public administration is under way,
especially since their legal systems have to align with the new requirements regulated by the
European right to good administration [1] enshrined in the Charter of Fundamental Rights of the
European Union [2].
At the European Union level there have been designed and approved a number of rules as
concerns the functioning of its institutions, considering the acknowledgement of need for closeness
to citizens and the observance of their fundamental rights. The same should be the proceeding at
internal level. Each Member State of the European Union should concern itself about identifying
and promoting the most adequate measures for ensuring a good governance and a good
administration. By identifying and applying at national level the principles governing the public
administration activity at European level, there can be created the requisites for a national public
administration that is transparent and efficient, close to the needs and interests of its citizens.
Although some authors of public law state that also within the European Union are still being found
situations where the principle of transparency is not sufficiently observed and the administrative
procedure is yet burdensome.
The EU functioning involves determined efforts by Member States to create that European
area that would ensure all European citizens a better living environment, through effective
governance and administration. Consequently, the main objective of the Romanian administrative
law should be the full integration within the European administrative law [Tofan, 2014, 3], more
specifically, in that European administrative space identified at the level of the European Union
Member States, by absorbing the common standards of public administration, defined by law and
strengthened through responsible practice and mechanisms [Tofan, 2006, 33].
In order to understand the concept of good administration, are of importance the common
principles applicable to public administration, identified and promoted especially by national and
European courts. The part played by the Court of Justice of the European Union in this field should
be emphasized since, from the Union’s beginnings, the main European jurisdiction has played a
very important role in identifying the principles applicable to administrative law, the provisions of
EU treaties not being able to cover all situations that may occur in practice, and the Union
legislation needed to be interpreted uniformly. The Court defines and redefines the general
principles of administrative law applicable to the Member States, the interpretation of European
legislation provisions often leading to a change of the manner in which certain principles applicable
to administration are understood by the Member States. Therefore is of special importance to
analyze the way in which these principles have been taken from national laws, have evolved and
have been subsequently implemented in the national systems of law [Bobaru, 2011] .
Thus, through its rich case law [3], the Court identified a number of principles with which
all the European Union member states should comply [Alexandru, 2008, 233]: principle of legality,
principle of proportionality, principle of legal certainty, non-discrimination principle, the right to
be heard within the decision-making procedures from administration, responsibility of the public
administration, etc. Analyzing the extent to which the administrative principles promoted by the
case law of the European Union’s Court of Justice can be found at the level of the Member States’
juridical system, it can be talked or not about the existence of a common European administrative
space [Cardona, 2009, 4]. The principles identified by the Court of Justice of the European Union
define the standards concerning the public administration organization and management, as well as
the efficiency of relations among the administration and citizens [Bălan et al., 2010, 25].
2. BRIEF ANALYSIS OF THE INFLUENCE OF THE CJEU CASE LAW IN
PROMOTING THE RIGHT TO GOOD ADMINISTRATION IN THE EUROPEAN
ADMINISTRATIVE SPACE
Looking back at the CJEU case law it can be found that the judges of this court have
contributed over the years to identifying and developing the principles which are, at the moment,
essential elements of good administration.
Thus, in the case C-55/70 [4] is put forward the general principle of good administration,
the applicant stating that the contested decision is contrary to this principle, according to which the
public authority going wrong should use its best efforts to remedy its mistakes. Also in this case is
invoked the principle of equal treatment, which the public authorities should observe in relations
with their employees.
In the joined cases C-33/79 and C-75/79 [5] were brought up the principles of legality,
equality of rights before a public authority and the importance of a good administration,
considering the need to give the same treatment to officials who are in the same situation from the
viewpoint of vocational qualifications, but also the obligation to justify its decision.
Also, the CJEU decision in Case C 186/87 [6] had a significant impact on the evolution of
the principle of equality taking into account the discrimination criterion based on nationality. The
British nationals Cowan was the victim of an assault at the exit of a subway station while he was in
France as a tourist. Since the aggressors have not been identified, Cowan required compensation
from the Commission of Compensation for Victims of Crime based on the French Code of Criminal
Procedure. The Commission rejected his request, arguing that it is not a French citizen, nor a citizen
of another country with which the French state would have had a reciprocity agreement in this
regard. Also Cowan did not even have his residence in France. Cowan invoked the Community law
(Article 12 of the Treaty establishing the European Community). The Court of Justice of the
European Community reminded that through forbidding the discrimination on grounds of
nationality it is intended to be obtained an equality of treatment among the nationals of Member
States.
This Community Court judgment has emphasized, even since 1987, that all nationals of the
Union’s Member States should enjoy equal rights from the Member States’ institutions, regardless
of their nationality and domicile, so as the fundamental principles of the Union to be truly observed.
It has therefore been applied the principle of equality before the law for all persons living within
the Union’s territory and being nationals of the EU Member States.
In Case C 177/88 [7], the CJEU shown that an employer directly violates the principle of
equal treatment if they refuse to employ a female candidate who, had previously been considered
apt for that work, just because she is pregnant. The court thus found that that person was
discriminated against because she was a woman, which is strictly forbidden in both national and
European legislation.
The principle of proportionality has been invoked quite much by the CJEU, eventually
being recognized as a general principle of the Union legislation. Thus, in Case C-331/88 [8], the
CJEU stated that: "the principle of proportionality is one of the general principles of
Community law. On the strength of this principle, the legality of establishing certain limitations as
concerns the conduct of a particular economic activity is subject to the condition that the
prohibitory measures to be appropriate and necessary for the public objective protected by the
legislation in this case; where there is a possibility to choose among several measures considered
adequate, it should be resorted to seeking the least burdensome, and the disadvantages should not be
disproportionate to the purpose intended" [Dobrinescu, 2013].
Likewise, in Case C 184/99 [9], the Nivelles Labor Court addressed the CJEU two
preliminary questions on the interpretation of Articles 12, 17 and 18 of the Treaty establishing the
European Community (TEC). Grzelczyk, a French citizen came to study in Belgium, had been self-
supporting during the first three years of study, working in various places. In the last year of study,
in order to focus on the study, he applied for minimex, a social security benefit. This has been
originally granted to him, then being withdrawn on the ground that he is an European Community
national registered as a student. The Court reminded that the Belgian citizen who would not have
worked but would have been in the same position as Grzelczyk would have received that social
security benefit, hence it has occurred a discrimination based on nationality. Therefore, the
European Court has ruled for the protection of all persons, regardless of their nationality, in
exercising their rights and applying legal regulations equally.
In Case C 144/2004 [10], the CJEU decided that the principle of equal treatment and
principle of proportionality are breached since the only criterion mentioned in the German law for
the conclusion of employment contracts on fixed term was the one related to age (52 years), which
excludes from a stable situation on the labor market a significant number of workers during an
important time of their career.
Thus it is considered that the discrimination of a person based on age infringes the general
principle of equal treatment from which should benefit all persons living or carrying out an activity
within the European Unity. Establishing the legal criteria regarding the retirement age for certain
professional categories should comply with the new European requirements through a motivation
that is objective, reasonable and proportionate to the aim pursued.
In Case C-290/07 P, the judges annulled the decision of the Court of First Instance of the
European Communities 29 March 2007, Scott / Commission (T 366/00), and referred the case to the
European Union Court to be rejudged, reasoned by the fact that it had been infringed the obligation
of diligence and impartiality by the Commission [11], by not requiring the relevant documents in
order to settle the case.
In another case of the CJEU, C-33/07 [12], it is expressly stipulated that "from the constant
case law of the Court it follows that a measure restricting the right to free movement cannot be
justified but if it complies with the principle of proportionality ... [the Community legislation]
does not oppose to any national regulation that enables restricting the right of a national from a
Member State ... provided, on the one hand, the behavior of that national to be a real, present and
sufficiently serious threat to a fundamental interest of the society and, on the other hand, the
restrictive measure taken into account to be capable of guaranteeing the attainment of the objective
intended and not to exceed the framework of what is necessary for its attainment.ˮ [Şandru et
al., 2013, 269-273]
In Case C-308/07 P [13] we find the CJEU insight on the components of the principle of
good administration, but also many references to the decisions of the European Court of Human
Rights, thus demonstrating once again the close relation between the two European legal systems.
In this case the CJEU judged on an appeal brought by a former representative of the European
Parliament against the Ruling of the Court of First Instance from 24.04.2007, in Case T-132/06, a
rulingn by which the Court dismissed the application brought by the Appellant for the annulment of
the Decision of the Secretary General of the European Parliament dated 22.03.2006, which
regulated the reimbursement of parliamentary allowances paid unaccountably. Among other things,
a ground of appeal raised by the Appellant was that the Parliament had breached Article 20 of the
Code of Good Administrative Behavior, which establishes the obligation to notify the decisions that
affect the rights or interests of individuals. The Court dismissed that ground as obviously
ungrounded, invoking the voluntary nature of this code.
The Court analyzed the grounds of the Appellant and the decision was to dismiss the appeal
as unfounded. But for this paper is of importance the manner in which the European Court analyzes
the Appellant's grounds and argues legally the decision. Thus, in paragraphs 54-56 it is underlined
once again that "although the EU has not joined the European Convention on Human Rights
(ECHR), ..., which excludes, on legal grounds, a direct application of the provisions of this
international convention in the Community legal order .... nevertheless, the fundamental rights form
an integral part of the general principles of law whose observance is ensured by the Court. To this
effect, the Court draws upon the constitutional traditions common to the Member States, as well as
from the guidelines provided by international instruments concerning the protection of human
rights on which Member States have cooperated or to which they joined. In this regard, the ECHR
has a special meaning. The subsequent evolution of the European integration process established
this case law on Article 6 (2) TEU. According to this provision, the Union observes fundamental
rights, as they are guaranteed by the ECHR signed in Rome on 4 November 1950, as well as how
they result from the constitutional traditions common to the Member States, as general principles of
Community law ". Therefore, the ECHR provisions and the case law of the European Court of
Human Rights have always been considered by the CJEU, although the EU has not yet joined
the ECHR.
Also, regarding the principle of good administration, it is argued in paragraph 89 of the
decision that "the principle of good administration, which the appellant invokes in the sixth reason,
is not a single principle of the administrative law, but gathers several principles and is, in a way, a
generic notion that includes all the principles of administrative law or some of these. The
mentioned principle is sometimes used as a synonym for the principles related to an administrative
procedure based on complying with the law. The principle of good administration requires
especially the national authorities to remedy the mistakes or omissions, to carry out the procedure
impartially and objectively and to make a decision within a reasonable time. Furthermore, this
principle implies includes an extended obligation of diligence and solicitude devolving on the
authorities, the right of defense, namely the obligation of agents to enable the persons concerned by
a decision to express its point of view, as well as the obligation to justify the decision".
As can be seen, there are listed essential elements of the good administration principle and
it is highlighted the fact that national public authorities should act responsibly and fairly, using an
impartial and objective procedure, as only in this way will be truly respected people's fundamental
rights.
The Court estimates in paragraph 90 that "the principles coming under the concept of good
administration principle vary and are not always easy to determine. Added to this is the difficulty
of evaluating whether it is about principles whose observance falls exclusively on the administrative
authorities or about powers that confer individuals a subjective right to require those authorities a
determined obligation of doing or not doing. This depends, on the one hand, on the legal nature of
the original text and, on the other hand, on the normative principle resulting from the relevant
provisions." On the other hand, "the CJEU case law was the main source for the formulation of
Article 41 from the CFREU ... that transformed the principle of good administration into a
fundamental right", as mentioned in paragraph 91 of the decision.
Thus, in the above mentioned decision, the CJEU briefly analyzes the emergence and
development of the principle of good administration, its essential elements, impossibility of clearly
falling it into a definition, and, not least, turning the principle of good administration into a
fundamental right through the Charter of Fundamental Rights of the European Union.
For determining the content of the good administration principle, it is also particularly
important the issue of access to the European documents. Thus, on 17 October, 2013 the CJEU
(First Chamber) was required to decide in an appeal concerning the denial of access to data relating
to the identity of Member States that have been the authors of the proposals for amending
Regulation (EC) No. 1049/2001. Thus, in Case C 280/11 P [14], the Council of the European
Union, the Czech Republic, the Kingdom of Spain and the French Republic demanded annulment
of the decision of the European Union Court dated March 22, 2011 (T-233/09 [15], Access Info
Europe/The Council) [16], by which the Court annulled the decision of the EU Council from 26
February 2009 of rejecting the request made by Access Info Europe, for access to certain
information contained in a note dated 26 November 2008, addressed to the General Secretariat of
the Council, working group concerning information established within the EU Council, on the
proposal for a new Regulation regarding public access to the documents of the European
Parliament, Council and Commission.
By the decision at issue, "the Council gave partial access to the document requested. More
precisely, this institution has notified Access Info a version of this document which did not allow
the identification of Member States authors of such proposals. The Council justified its refusal to
disclose the identities of the Member States concerned, on the strength of the exception provided
for in Article 4 para. (3) of Regulation No. 1049/2001, for the reason that the disclosure of these
identities would have seriously prejudiced its decision-making without such disclosure being
required by a higher public interest. Thus, taking into account the preliminary nature of the
discussions under way at that time, disclosure of the concerned Member States’ identities would
have diminished the margin of maneuver of delegations during the negotiations characterizing the
legislative procedure within the Council and would have thus affected its ability to reach an
agreement.
By preliminary application lodged at the Court Registry on 12 June 2009, Access Info
Europe brought an action for annulment against the decision, which was accepted by contested
judgment (T 233/09) [Lea and Cardwell, 2015, 61-80; Abazi and Hillebrandt, 2015, 825-845]. The
Court considered first that it is precisely the principle of democratic legitimacy that requires the
authors of the proposals contained in the requested document to respond to the public for their
actions, and this the more so when that document belongs to the legislative procedure. The Court
also held that it is the very nature of democratic debate that makes a proposal to amend a draft
regulation to be the subject of comments, both positive and negative, from the public and the media.
The Court considered that the various proposals for amending or drafting formulated by the four
delegations of Member States, which are presented in the requested document, are part of the
normal course of the legislative process, which implies that they can not be considered sensitive not
only from the exclusive perspective of involving a fundamental interest of the Union or its Member
States, nor from the perspective of any other criterion. The Court accepted the appeal and annulled
the Council decision.
The Court, in turn, estimated that when an institution applies one of the exceptions provided
in Article 4 of the Regulation No. 1049/2001, it has an obligation to weigh up the particular
interest that has to be protected by non-disclosing the document concerned and, in particular the
general interest to make the document accessible, considering the advantages which, as shown in
reason (2) of the Regulation no. 1049/2001, result from an increased transparency, namely a better
participation of citizens in the process of decision-making, as well as a higher legitimacy,
effectiveness and accountability of administration to the citizen in a democratic system. The Court
also decided that these considerations are undoubtedly of particular relevance when the Council is
acting in its capacity of legislator. Transparency in this regard contributes to strengthening
democracy by the fact that enables citizens to observe all the information on which a legislative act
was based. Thus, the possibility of citizens to know the bases of legislative actions is a condition for
the effective exercise by the latter of their democratic rights”.
Consequently, the Court dismissed the appeal brought by the Council, ruling once again in
the sense of observing the fundamental right of access to the Union institutions documents, since it
really ensures citizens’ participation in decision-making and increases the administration
responsibility towards the decisions made.
3. CONCLUSIONS
These are just a few examples of the decisions of the CJEU, a court which contributed
decisively to shaping the principle of good administration and eventually to its imposing as a
fundamental right of individuals across the EU. In order to analyze the concept of good
administration is of special significance the fact that the Treaty of Lisbon, the Charter of
Fundamental Rights of the European Union acquired primary legal force, having the same
juridical value as the Treaties. Thus, the right to good administration provided in Article 41 has
become legally binding for all the EU Member States, not only for the EU institutions. They should
identify the practical ways that would lead to the actual achievement of this right, the main elements
mentioned in the article representing a starting point for the Member States in drafting internal
regulations that will determine a good administration at national level, since the Treaty provisions
underline that the Union has currently as objectives not only a unitary economic development, but
also strengthening the observance of people's fundamental rights, thus, implicitly, also the right to
good administration.
The CFREU is a legally binding instrument on which the European citizen can stand before
any European court. It was "a benchmark in the European construction, in the sense that, this time,
integration did not aim at economic values, but at values specific to citizens and their rights"
[Tănăsescu, 2010, 17].
The Charter is a "real catalog of rights from which all European citizens should benefit
before all EU institutions and towards Member States when the latter implement the European
legislation" [Tanasescu, 2010, 18]. Although it has on the basis the constitutional traditions
common to the Member States and the European Convention on Human Rights [17], still remains a
codification specific to the European Union, in it being also found rights that are not stipulated in
the European Convention on Human Rights, such as: social rights of workers, personal data
protection, bioethics and, not least, the right to good administration [Tănăsescu, 2010, 18].
Therefore, at European level, the EU member states citizens, but also third-country nationals [18]
enjoy the right to good administration in its relations with the EU institutions and bodies,
according to Article 41 of the Charter of Fundamental Rights of the European Union.
[1] Subjective right mentioned for the first time in the Treaty of Nice (signed on 26.02.2001 and entered into force on
01.02.2003) that proclaimed the first draft of the Charter of Fundamental Rights of the European Union, which became
binding only on 01.12.2009 based on the Treaty of Lisbon.
[2] Consolidated version published in OJ C 326, dated 10.26.2012.
[3] The onset of judicial practice of the Court in the administrative law area was the Judgment in Case Algera from
July 12, 1957 (Case 7/56, Algera and others / Joint Assembly, July 12, 1957, ECR 1957-1958 p. 39, EU: C: 1957: 7)
when it has been found the existence of a double restriction: on the one hand, the lack of a Community rule and, on the
other hand, the prohibition on denial of justice. In this case was put forward the issue of rendering void an
administrative act that creates subjective rights and it was found that no Community provision indicated under what
conditions a Community institution may render void such an administrative act. Therefore, the Court considered that it
should be resorted to the rules recognized by the legislation, doctrine and case law of the Member States in order to be
given a judgment.
[4] Available on page http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:61970CJ0055, accessed on
17.11.2016, ECLI:EU:C:1971:50.
[5] See the decisions on page http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A61979CJ0033 ,
accessed on 17.11.2016, ECLI:EU:C:1980:139 .
[6] CJEU, Case Ian William Cowan v. Trésor public C. 186/87, ECLI:EU:C:1989:47, available on page http://eur-
lex.europa.eu/legal-content/EN/TXT/HTML/?isOldUri=true&uri=CELEX:61987CJ0186 , accessed on 17.11.2016.
[7] CJUE, Case Elisabeth Johanna Pacifica Dekker v Stichting Vormingscentrum voor Jong Volwassenen (VJV-
Centrum)177/88, ECLI:EU:C:1990:383, available on page http://eur-lex.europa.eu/legal-
content/EN/TXT/?uri=CELEX%3A61988CJ0177 , accessed on 17.11.2016.
[8] Case C-331/88, The Queen v. Minister of Agriculture, Fisheries and Food and Secretary of State for Health, ex
parte: Fedesa and others, ECLI:EU:C:1990:391.
[9] CJEU, Case Rudy Grzelczyk v Centre public d'aide sociale d'Ottignies-Louvain-la-Neuve 184/99,
ECLI:EU:C:2001:458, available on page http://eur-lex.europa.eu/legal-
content/EN/TXT/?uri=CELEX%3A61999CJ0184 , accessed on 17.11.2016.
[10] CJUE, Cauza Werner Mangold v Rüdiger Helm 144/04, ECLI:EU:C:2005:709, available on page http://eur-
lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A62004CJ0144 , accessed on 17.11.2016.
[11] Paragraph 100 from the decision, ECLI:EU:C:2010:480.
[12] Case C-33/07, Ministry of Administration and Internal Affaires - Directorate General for Passports of Bucharest
versus Gheorghe Jipa, ECLI:EU:C:2008:396.
[13] ECLI:EU:C:2008:498.
[14] ECLI:EU:C:2013:671.
[15] ECLI:EU:T:2011:105.
[16] Acces Info Europe is a governmental organization for human rights, with headquarters in Spain, which campaigns
for the promotion and protection of the right of access to information in Europe, as an instrument to defend the rights
and freedoms of people and to facilitate the participation of citizens in decision-making by public authorities; see page
http://www.access-info.org , accessed on 17.11.2016.
[17] In the doctrine is observed that the ECHR had to frame their case law by reference to the legal order of the
European Union and used the Charter to strengthen the interpretation of a law or to justify another orientation of its
case law, for the purpose of modernizing the rights provided in the Convention. In other words, is seen a relation of
influence and mutual enrichment between the two legal systems - Marie-Luce Paris, European Court of Human
Rights and European Union law, especially the Charter of Fundamental Rights: a subtle management between systemic
adjustments and mutual enrichment, in the Romanian Journal of European law, no. 2/2013, p. 149-178.
[18] In the doctrine is considered that using the words "any person" and not those of European citizen gives the
possibility of invoking these rights not only by the citizens of Member States, but also by the citizens of third countries,
which brings the Charter a global dimension and confers coexistence with other international instruments on human
rights - see Oana Mihaela Salomia, Autonomy of the Charter of Fundamental Rights of the European Union, Law
Magazine no. 2/2013, p. 253; the author considers also that Title V of the Charter includes "modern " and "present-day
rights", which derive from the provisions of the EU law, also derived in the CJEU case law, the right to good
administration being sometimes considered "the only novelty" brought by the Charter - see also Frédéric Sudre, The
European and international law of human rights, Polirom Publishing House, Iaşi, 2006, p. 127.
REFERENCES
1. Vigjilenca Abazi and Maarten Hillebrandt, The legal limits to confidential negotiations:
Recent case law developments in Council transparency: Access Info Europe and In ’t Veld,
Common Market Law Review, 2015.
2. Ioan Alexandru, Drept administrativ european, Ed. Universul Juridic, Bucureşti, 2008.
3. Dana Apostol Tofan, Drept administrativ, vol. I , ed. 3, Ed. C.H.Beck, Bucureşti, 2014.
4. Dana Apostol Tofan, Instituţii administrative europene, Ed. C.H.Beck, Bucureşti, 2006.
5. Ana Daniela Bobaru, Rolul Curţii de Justiţie a Uniunii Europene în procesul de interpretare
şi aplicare uniformă a dreptului Uniunii Europene, Ed. Universitară, Bucureşti, 2011.
6. Emil Bălan et al., Dreptul la o bună administrare şi impactul său asupra procedurilor
administraţiei publice, Ed. Comunicare.ro, Bucureşti, 2010.
7. Francisco Cardona, Integrating National Administrations into the European Administrative
Space, SIGMA , Confference on Public Administration Reform and European Integration,
Muntenegru, 26-27 martie 2009.
8. Luisiana Dobrinescu, Principiul proporţionalităţii în dreptul european. Exemple de
neproporţionalitate din legislaţia şi practica românească, 16.03.2013, codfiscal.net, la
pagina http://codfiscal.net/32470/principiul-proportionalitatii-in-dreptul-european-exemple-
de-neproportionalitate-din-legislatia-si-practica-romaneasca , accesată la data de 17.11.2016
9. Stephen Lea, Paul James Cardwell, Transparency Requirements in the Course of a
Legislative Procedure: Council v. Access Info Europe, (2015) 21 European Public Law,
Issue 1, p. 61–80 .
10. Marie-Luce Paris, Curtea Europeană a Drepturilor Omului şi dreptul Uniunii Europene,
mai ales Carta drepturilor fundamentale: un management subtil între ajustări sistemice şi
îmbogăţiri reciproce, în Revista română de drept european, nr. 2/2013.
11. Oana-Mihaela Salomia, Autonomia Cartei drepturilor fundamentale a Uniunii Europene, în
Revista Dreptul nr. 2/2013.
12. Frédéric Sudre, Drept european şi internaţional al drepturilor omului, Ed. Polirom, Iaşi,
2006.
13. Mihai Şandru et al., Procedura trimiterii preliminare: principii de drept al Uniunii
Europene şi experienţe ale sistemului român de drept, Ed. C.H.Beck, Bucureşti, 2013.
14. Elena Simina Tănăsescu, Carta drepturilor fundamentale a UE: avantajele şi efectele ei
pentru cetăţenii europeni, în Revista română de drept european, nr. 4/2010.
RO
Revista primeste articole, din
toate domeniile economice, pe cele 5 sectiuni: Economie, comert, servicii Management si administrarea afacerilor Contabilitate-finante Statistica, informatica si matematica economica 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 14, 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. Numele si prenumele autorului/autorilor va fi scris cu litere bold, iar numele de familie va fi scris cu litere mari (caps). 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: (figure no. 1); (table no. 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 se vor folosi note de subsol, dar se poate opta pentru unul din urmatoarele moduri de citare: - sunt permise note la finalul lucrarii (endnotes), situate înaintea bibliografiei si introduse manual. Ele se vor scrie cu Times New Roman, caracter 10, italic. Trimiterile bibliografice din textul lucrarii se pot numerota cu cifre arabe [1], [2] etc. - trimiteri in text intr-o paranteza specificand numele autorului si anul aparitiei lucrarii: (Johnson, 2000), (Johnson and Jackson, 2001) - lucrare cu 2 autori, (Johnson et al., 2002) - acolo unde sunt mai multi autori, (Johnson, 2000; Peterson, 2001) - daca ideea se regaseste la mai multi autori, sau (Johnson, 2000a) si (Johnson, 2000b) - in cazul in care exista doua lucrari diferite ale aceluiasi autor aparute in acelasi an (a si b indicand ordinea in care apar la bibliografie). Se poate specifica si pagina in paranteza (Johnson, 2000, 250). Este obligatoriu ca autorii citati in text sa se regaseasca la bibliografie. 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 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. Titlul lucrarii va fi scris cu font italic. 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 (intr-un document separat, incarcat ca fisier suplimentar). Veţi primi un răspuns în urma procesului de recenzare. Lucrarile se vor incarca on-line, astfel: pana pe 31 martie pt nr.1 si pana pe 30 septembrie pentru nr.2. In cazul in care se primesc foarte multe lucrari, ordinea publicarii este cea cronologica a datei in care au fost trimise. Pentru alte detalii sau noutăţi vă rugam urmăriţi site-ul revistei: www.annals.seap.usv.ro .
EN
T welcomes theoretical and
empirical articles, from all economic fields, according to the 5 sections: Economy, trade, services Management and business administration Accounting-finance Statisitics, economic informatics and mathematics 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 14-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. First name will be in caps and the whole author(s) names will be in bold. 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. 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;
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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: (figure no.1), (table no.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. Footnotes are not allowed, but you can choose one of the following citation ways: - endnotes at the end of the paper, situated before bibliography and introduced manually. They will be written in Times New Roman, size 10, italic. The bibliographic references in the text of the work will be numbered with [1], [2] etc. - citations in text in a parenthesis specifying the author name and the year of the work apparition: (Johnson, 2000), (Johnson and Jackson, 2001) – work with 2 authors, (Johnson et al., 2002) - work with several authors, (Johnson, 2000; Peterson, 2001) – if the idea is found at many authors, or (Johnson, 2000a) and (Johnson, 2000b) - in the case where there are 2 different works of the same author appeared in the same year (a and b indicating the order in which they appear at bibliography). It can be also specified the page in the parenthesis (Johnson, 2000, 250). Authors cited in the text must be found in the bibliography. 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 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. The title of the work will be written in italic. Important Specifications
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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 Romanian authors will also send the article in Romanian language (in another document, uploaded as a supplementary file), necessary for the scientific control. The journal appears twice a year (June and December). For the first number of the review (June), the manuscripts should be submitted on-line until 31 March and for the second issue until 30 September. In the case that a lot of articles are received, the publication order is settled chronologically by the date when they were submissed to us. For other details or news, please check our site: www.annals.seap.usv.ro .
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