Social Economy in Romania.An overview

Gdynia 25 June 2008

Valentin Burada

Civil Society Development Foundation

General Context

• Lack of mutual trust within the Romanian society;

• Non-functional subsidiarity; • Top-down definition of regions;• Lack of local resources;• Lack of true local initiative - donor-driven

behavior;• Trade unions perceived as

politicized/corrupt;

Main actors

• Cooperatives (cooperative societies; credit cooperatives; agricultural cooperatives)

• Mutual Organizations (Mutual Help Houses - CAR, Pensioner Mutual Help Houses)

• Nongovernmental Organizations– Direct Economic Activities– Externalization of public interest

services (Social services, Medical services, Education and Professional Training Services)

Cooperatives

• In 2004 there were 2129 active cooperatives; 50% in commerce and services; 25% in handcraft;

• 0,1% of the total workforce was employed within cooperatives (including agricultural cooperatives);

• In 2005 - Law no.1/2005 regarding the organization and functioning of cooperatives

=> In 2007 - 38,177 members

Example:• in 2004 “Cooperatia de consum” included 1,513 organizations in

2,688 communes, 13,000 villages and 230 towns

• in 2007 “Cooperatia de consum” – 1,073 organizations mainly in the rural areas, of which 1.009 are associated in the 41 county Unions

Social Economy in Romania: Challenges (Cooperatives)

• Weak cooperative movement – strong resistance to the idea of agricultural cooperatives and even agricultural associations

• Other cooperatives – deligitimized as being heirs of former communist cooperatives;

• Strong influence and control by cooperative central structures (FEDERALCOOP, CREDITCOOP and CENTROCOOP) - at stakes – the properties of former communist cooperatives

• Credit cooperatives – discredited by fraud and bankrupcy in the 2000s (e.g. Banca Populara, 2001)

NGOs as emerging social economy actors in Romania

• NGOs are the most important actors in social and community development in Romania

• The specific of service provider NGOs places them in a closer position to the concept of social enterprise– Profit is not their main goal – Members have equal rights– Flexibility and Innovation– Voluntary participation of members and their

involvement in the provided services

Organizaţii neguvernamentale

• Social Services• Health Services• Education• Employment

NGOs as emerging social economy actors in Romania

NGOs are the most important private actors

on the social service market in Romania

Social services (1)

• Financing of social services provided by NGOs is done largely through grants from international and private donors

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

Social services (2)

Forms of social contracting:

• Grants (Law 350/2005)

• Public tenders (OUG 34/2006)

• Service contracts (OG 68/2003)

• Public-private partnerships (OG 68/2003)

• Subsidies (Legea 34/1998)

Social service in Romania: Challenges

The externalization system is overregulated (4 totally

different instruments of social contracting)

Financial allocation is not based on a local strategy

regarding social needs

The financing of social assistance system is centralized

(70%)

Focus on social benefits and not on social services

Financing of services for children remains prioritary

Health services

• Law 95/2006 regarding reform in the health field mentions NGOs as eligible entities to provide private emergency health care services as well as private hospital services within private health units.

• In practice – very few NGO providers: palliative care and home care for elderly (combines social services and health services – problematic funding)

Education

• NGOs can establish education units accredited by the Ministry of Education or local School Inspectorates.

• in 2004/2005 there were 62 private units of upper education, with 155,000 students (25% of the total) and 4,000 employees (40% of the total);

• 50,000 beneficiaries in the pre-universitary private education system.

Employment

• Law 84/1995 – NGOs can organize trainings for qualification, professional specialization and professional reconversion.

• In 2005 ¼ of the registered such training programmes registered at national level were offered by NGOs, professional associations, profesional associations, trade unions and student associations;

• Trainings are funded from public sources, Phare, donors and own resources

Economic activities

• Romanian law allows NGOs to develop economic activities, yet it limits their scope to the main objective/mission of the organization (Art. 48, OG 26/2000).

• For economic activities with no relations to the main objective/mission of the organization, NGOs can establish an economic enterprise as entity distinct from the organization.

• NGOs are exempt from profit tax on economic activities amounting up to 15,000 Euro in a fiscal year, but not above 10% of the total revenues exempted from profit tax

• For the revenues exceeding this level – the 16% tax

Economic dimension of NGOs

72%

13%

15%Venituri totale din activitatifara scop lucrativ

Venituri totale din activitati cudestinatie speciala

Venituri totale din activitatieconomice

Revenues of NGO service providers

15%

22%

7%

4%1%2%11%

4%

17%

0%

1%

2%

0%

1%

1%

12%Venit.din cotizatii

Venituri din donatii

Venituri din sponsorizari

Venituri din dobanzi

Venituri din dividenente

Venituri din cote-parti primite potrivitstatutului Ajutoare si imprumuturi nerambursabiledin surse externeSubventii primite de la buget

Alte venituri din activitatile fara scoppatrimonial - total (rd.11 la 17)Venituri din despagubiri

Venituri din diferente de curs valutar

Venituri din reclama si publicitate

Venituri pentru care se datoreaza impozitpe spectacoleVenituri din valorificarea bunurilor

Venituri din taxele de inregistrare

Alte venituriSubvenţii primite de la buget

Social Economy in Romania: Challenges (NGOs)

• Grant seeking opportunism• Unsustainable job creation• Lack of community involvement and

ownership• Civil society or social economy organizations

are often seen as parallel to the (emerging) welfare state:

Positive approach: places to outsource state provision of services and assistance

Negative approach: rivals to state provision

CIVIL SOCIETY DEVELOPMENT FOUNDATION /

FUNDATIA pentru DEZVOLTAREA SOCIETATII CIVILE

Splaiul Independentei nr. 2k, et. 4 sector 3, Bucureşti, RomâniaTel: +4-021-310-0177  Fax: +4-021-310-0180

valentin.burada@fdsc.ro

www.fdsc.ro