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Țara Moldovei

The untapped potential of Iași and Romania’s north-east.

July 15, 2019 - Kaha Baindurashvili - Articles and Commentary

Traditional house in Voronet, Bukovina (Moldavia). Photo by Kaha Baindurashvili.

My introduction to Iași began with the taxi ride from the Iași International Airport to the Copou district where my residence was located. Cue to a hilly road, my immediate feeling was positive after spending the past two months in plain Romanian cities. After passing the private suburban homes, I found myself in a communist-era housing district for two or three minutes followed by impressive neo-classical architecture, which reminded me that Iași is known to be the cultural capital of Romania . To make that more potent, it hosts the huge Palace of Culture, initially designed as a princely palace. However, Iași is more than the home of many talented writers and philosophers from past centuries. It is the capital of a region where the most famous and influential Romanian poet, Mihai Eminescu, was born (Botoșani, Moldavia). It was also Iași where the Romanian literary society, Junimea, was founded in 1863  —  where the Romanian renaissance started. Members of this society later defined the cultural principles of the entire Romanian nation, which remained as the foundation for modern Romanian society. In addition, a few years earlier, in 1860, Iași became the home of the first Romanian University, which currently bears the name of its founder Alexandru Ioan Cuza, the architect of the united Romanian state.

Alexandru Ioan Cuza University is located in the Copou district, exactly where I was stationed, in a hilly part of Iași. It is a popular belief that Iași is built on seven hills like Rome, but nevertheless, the hilly location gives the city a special charm, and its rather developed tramway system makes it very wanderer-friendly. Despite its green transport, some sources say the city’s air pollution is higher than normal. That could be true, because the city is expanding fast due to the ongoing urbanisation and immigration from the Republic of Moldova, which makes it the second largest urban area in Romania after its capital, Bucharest. Despite transitional challenges, the city has  solid infrastructure and quality of life, lots of greenery, and hosts the oldest and largest botanical garden in Romania, named after its founder, Anastasie Fătu. This man, in fact, is a great example of the functioning state. Born in rural Moldavia into a peasant family, Anastasie made it possible to obtain an education through receiving a scholarship from Iași gymnasium, a merit-based accolade that now makes it possible for us to enjoy this wonderful garden.

The botanical garden remains a good example of the benefits of meritocracy, but I doubt the current Romanian meritocracy can produce anything similar. Romania ranks 61 out of 180 countries in the 2018 Transparency International Corruption Perception Index, which leaves it far behind Western Europe and the European Union’s average performance. There is no need to be a researcher to understand the roots of this perception. On May 27th, Romania made world headlines in 2019: “Romania corruption: PSD chief Liviu Dragnea jailed”, and in 2018: “Romanian dirty money has been invested in Madagascar”. In the daily life of common citizens, this issue may not feel immediately pressing because petty corruption is not present; however, the elite corruption alongside another visible sin  —  nepotism  —  cannot make the public sector efficient and capable enough for long-term strategic planning. One local friend from Iași told me this joke, which better describes the depth of nepotism in the current Romanian government than many articles of research: “Why is no one having sex in public companies? Because the workers there are all relatives”.

When I asked one of my respondents in Iași what he would assume to be the biggest strength of Romanian companies, he answered: “Resilience through flexibility”. And this is true, despite the not-so-friendly business environment and less developed infrastructure, the Romanian private sector still performs better than one might expect. Certainly, its high growth “benefited” from the lower development baseline, large internal consumer market, and the eastern expansion of the Central European companies, but it is also true that without smart, creative and hard-working Romanians it could not be realised.

Amazon opened its first Romanian office in Iași in 2005 ⁠— its first ever research and development facility in all of Eastern Europe. Now it keeps 1,000 Iași residents employed and plans to increase its staff to 1,800 and its office space to 18,000 m² ⁠— up from 5,000 m², which is a lot for a town with a population of about half of a million people. That is the power of investment, but it is only possible when a skilled workforce is available. Alexandru Ioan Cuza University is the breeding ground for highly skilled and very motivated Moldavian youth  —  that is really what makes it possible to invest in Romania  —  and it is a strong base for the future of the country. Nevertheless, many young professionals are leaving Romania for higher salaries and a better life. “They do not want to struggle and wait forever as we have been doing for the better future,” I was told by a local businessman in Iași, “and they do not want to become entrepreneurs because, even my daughter, she sees I cannot make enough money and how hard I work for whatever I earn, together with lots of difficulties I face.” Many other businessmen complain in the same way — mostly blaming the government policies  —  describing them as hostile towards business unless you are well connected.

When asked about the roots of the problems the locals usually point to the Ottoman past and the historical influence of the Russian Empire. They say the side payments and kickbacks were brought by Turkish invaders, which then developed into the extreme “bribery-based governing system” after Phanariotes bought their domains in Romania and then sold local government positions in order to recover the initial investment. But, as a matter of fact, the Ottoman Empire was dissolved in 1922, almost a century ago. Its rule over Romania ended in 1877  — 142 years ago  —  the same period that the Western USA developed from being the land of the cowboy to the home of Tesla.

A more worrying sign is that contrary to the Ottoman-affected areas, the former Austrian area in the Romanian west (Banat) link their relatively more developed economy to Habsburg rule. Indeed, it is obvious that the Habsburg Empire had been far more development-oriented than its Eastern counterparts, but that shouldn’t be the determinant of a future development in a country which has been independent since 1877. However, when one visits Bucharest the logic of Banat inhabitants becomes clear. The capital city is the home of great architecture, but many buildings are decaying and it is recognized to be the most congested capital city in the European Union.

The Habsburgs built a river transportation channel and a railway in Timișoara in the middle of the 19th century that made the city into a manufacturing hub. The locally produced goods were transported to other parts of the Empire through the Bega river’s artificial channel and its commercial harbor served a similar role to today’s airport cargo terminal. In today’s Romania, the government is still considering the construction of a highway which would link Iași to other parts of Romania or to western countries. One can blame the Ottomans, but according to the Road sub-component of the WEF’s Global Competitiveness Report 2018, Romania is 92 among 140 countries, next to Sierra Leone (91) in terms of connectivity.  

After all, the Habsburg’s investment projects were not philanthropic. Their interest was to maintain and grow their influence, and economic integration was among the tools to achieve greater regional power. Since the fall of the Soviet Union, the Romanians in both republics were quick to admire the idea of the “reunion” of Romania and Moldova ⁠— but what about integration? How would it work without greater integration, which does not exist even for its own Romanian Moldova?

The Romanian Government provides preferential treatment to citizens of the Republic of Moldova through easy-to-acquire Romanian citizenship, university grants, and more, but many Moldovans use it to then relocate to other wealthier countries in the European Union rather than move to Romania, says Iași locals. This is true, however little was done to promote the integration of the Republic of Moldova into the Romanian economy. Chișinău International Airport passed the one million passenger mark in 1987, while it took 30 more years for the Iași International Airport to achieve the same milestone, which it did in 2017. A possible model Romania and Moldova could follow is one of transnational transport hubs. France did not develop its own international airport next to the Geneva International Airport, rather, a deal was made with Switzerland to make the Geneva airport a hub for both countries. There is also a similar deal between Turkey And Georgia — the Batumi International Airport in Georgia serves both countries. It still remains an option for Romanians to start co-sharing the Chișinău airport cargo capacity instead of enlarging its own.

Iași is the most Eastern city in the central and southern part of the European Union, which could have made it a logistical and industrial hub for both the east and west. Together with its proximity with the Odessa Seaport, it could claim an important role in the renewed Silk Road but only if transport connectivity is improved, which could lead to the transformation of Iași into an important city in the Eastern Europe. Moldavia is not only a beautiful part of the world, but is also the  place of the lovely Painted Monasteries, which have the potential to attract thousands of world travellers. Iași could become a proud tourist center in addition to its IT sector and other potential manufacturing sites.

Yes, it is true that there is a legacy and there is a culture, and it is true that families continue to pass down their cultural codes to the next generations. This can continue forever if this “distortion” is not effectively corrected by the state. These legitimate mechanisms for correction are the formal education system and the rule of law. It is helpful to define a set of policies today to achieve a better future.

Kaha Baindurashvili is a research fellow at the New Europe College in Bucharest and the Former Minister of Finance of Georgia (2009-2011). He writes for different publications and covers political economic issues in the Eastern Europe and Central Asian region. 

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