UNDERLAYING FACTORS THAT CONTRIBUTED TO ROMANIA’S CURRENT WINE SECTOR SITUATION
Updated: Jul 2, 2021
One of the reasons why Romania’s wine sector was unable to develop, and still is at a standstill today after three decades since the collapse of communism, has been mainly due to the defects of the agrarian reform in the 1990s. Farmers’ agricultural holdings expropriated by the so-called Agricultural Cooperatives for Production (CAP) during collectivization were returned to families in 1991 with households receiving only up to 10 ha of arable land, followed by an amendment to the law six years later that granted families up to 50 ha of farmland. Moreover, throughout the land restitution process, former vineyard owners received scattered parcels of vine that averaged 0.15 ha in size. The law also stipulated that anyone who received any farmland was prohibited from selling it for a certain number of years. In this grand scheme of things, policymakers, however, failed to consider that significant rural labor force abandoned agriculture and moved to urban areas during central planning. As such, former landowners unexpectedly regained land possession that they had no capability to farm on their own.
Lacking mechanization, resources and needed inputs, lands were left in disrepair and unfarmed for years. As such, the Romanian wine sector’s development and modernization were impossible in an environment characterized by vineyard fragmentation, land boundary disputes, conflicts regarding ownership titles, lack of government subsidies and chaotic government laws with restrictions on land sales. This has led to a catastrophic impact on any kind of agricultural private or public investment. Regarding foreign investments, Romania’s laws prohibited the purchase of agricultural land by any foreign enterprise. As such, with no foreign investment allowed and a huge lack of governmental resources to restore traditional farming, wineries were slowly rebuilt by local monopoly. Communist State Agriculture Enterprises (IAS) were the last to be privatized and in most cases by Managerial and Employee Buyouts (MEBO). In 2000, 9.4 million (IAS) ha were finally returned to former owners, which in turn were bought out eventually by (IAS) former employees who had all the know-how, connections and finances to consolidate the scattered parcels into continuous vineyard lands, that today account for the largest wineries in Romania. It was only after Romania’s entry into the EU in 2007, that these few large wineries, that had the manpower, knowledge, time and perseverance to apply for EU funds, were able to modernize their facilities, buy new equipment and technology and ultimately raise the quality of wine to make it somewhat internationally competitive. Thus, small producers were left behind in the process of winery infrastructure improvement and export promotion. Up to now, foreign investment in the wine sector is extremely low in Romania due to under-established Romanian wine foreign markets, vineyard fragmentation, lack of demand for premium bottlings and investment non-transparency.
As such, in order to increase foreign direct investment inflow, bold steps need to be taken to improve the business environment within the Romanian wine industry. Measures should include stimulation of investments and competition, reduction of business risks and costs, and enhancement of legal frameworks to ensure transparency and efficiency when conducting business transactions. Moreover, it is of paramount importance to integrate Romanian wines into global markets through an aggressive nation-wide international marketing campaign promoting an attractive brand image for Romanian wines.