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Global Development Institute

Romania's Hardware and Software Industry: Building IT Policy and Capabilities in a Transitional Economy

Mihaiela Grundey and Richard Heeks

Abstract

This paper reviews the past, present and future of Romania's information technology (IT) industries. It describes Romania's IT industry under Communism and the changes in both IT policies and the IT industry following the December 1989 revolution. Though flawed in many ways, Romania's Communist-era isolationism did lead to some build-up of IT-related technological capabilities.

Post-1989 liberalisation has encouraged a suppression of higher-level capabilities but a substantial increase in lower-level IT skills. Hardware capabilities have been lost far more than those in software. In part, this is due to various 'natural protections' that shield the domestic software market from foreign packages. In part, it is due to continued state support for Romania's software industry.

Future development of this industry is likely to focus more on services than packages, and more on the domestic than the export market. However, future development will depend on continuing government intervention: not the state ownership and regulation of the Communist era, but promotional interventions that support what will be a vital keystone of all national economies in the 21st century.

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Educator's guide

Synopsis questions

  1. What were the pros and cons of Communist-era policies for the development of the Romanian IT industry? [parts 2 & 5]
  2. What is technological capability? Why is it important to developing and transitional countries? What strategies can such countries adopt to increase their level of technological capability? [parts 2, 3 & 5]
  3. How has Romanian IT policy changed since Ceausescu's day? And how has it stayed the same? [parts 2 & 3]
  4. Is Romania's IT industry currently in a sickly or a health state? [part 4]

Development questions

  1. What lessons can other countries learn from Romania's IT policy experience? [overview]
  2. Explain why IT policy has and has not changed since the Communist era.
  3. Do developing and transitional countries need a national IT policy or should they 'leave it to market forces'?
  4. Should a developing/transitional country's IT industry be entirely public-owned, entirely private-owned, or some combination of the two? Justify your answer on the basis of Romanian experience.
  5. Can a developing/transitional country develop its IT industry without the assistance of multinational corporations? What pros and cons does MNC intervention bring?
  6. What IT policy recommendations would you make to the Romanian government?
  7. Which is more important to a developing/transitional economy: a hardware industry or a software industry?
  8. Where do you think Romania's IT policy and IT industry will be in 10 years' time?