June 6, 2018 / 1:15 PM / 10 months ago

Romanian legislators okay sovereign fund to finance roads, hospitals

* The fund will have $2.3 billion capital, stakes in 33 companies

* Fund is designed to finance infrastructure, stimulate economy

* Opposition plans to challenge the bill at constitutional court

* The country, is among most graft-prone EU members

By Radu-Sorin Marinas

BUCHAREST, June 6 (Reuters) - Romania’s lower house of parliament on Wednesday approved setting up a $2.3 billion sovereign wealth fund, a key policy goal of the ruling Social Democrats, to stimulate growth and finance projects such as building roads and hospitals.

The fund, Fondul Suveran de Dezvoltare si Investitii, which was voted in by 174 MPs to 98 against, would hold a mix of cash and equity in some of the state’s most profitable firms, listed and unlisted, in the transport, pharmaceutical and energy sectors. I

“(Such) a fund is operating in many other European countries and has aided infrastructure development. It will generate a large number of jobs and help economic development,” said Social Democrat leader Liviu Dragnea.

The opposition centrist National Liberals, however, attacked the creation of the fund saying it would rob the economy of competitiveness and benefit politicians and their backers.

Analysts and investors have said the fund could potentially make domestic companies more efficient, while others have expressed concern over the appointment of the fund’s management which runs the risk of being politicised.

Critics also worry that domestic-focused funds in general can fall prey to a misallocation of resources or outright corruption, citing the example of Malaysia’s 1MDB, which has been focus of money-laundering probes in at least six countries.

Romania is listed by Transparency International among the EU’s most graft-prone member states in its annual index of corruption perceptions.

The bill said the fund’s portfolio would include controlling or minority stakes in 33 companies and cash of 9.0 billion lei ($2.28 billion) to be disbursed by the finance ministry.

The companies are both listed, such as state-owned gas producer Romgaz or OMV Petrom and unlisted, like hydro power producer Hidroelectrica.

Raluca Turcan, vice president of the opposition National Liberal Party, said the bill defied “all the rules of the functioning market economy and of free competition.”

“What free economy, what competition is this, that unknown directors manage the state’s most important assets and consequently distribute profits in totally non-transparent and discretionary manner without control from any institution,” she said. Her party said they would challenge the bill in the constitutional court.

$1 = 3.9506 lei Editing by Richard Balmforth

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