BR 07/2015 by Business Review

INTERVIEW: GreenGroup, which comprises six recycling and waste management companies, has invested EUR 70 million since starting local operations 12 years ago. Constantin Damov, co-founder of the group, tells BR why waste collection is diﬃcult in Romania »page 34

GREEK CRISIS WITH TOTAL DEBT OF OVER EUR 320 BILLION, GREECE WAS TEETERING ON THE EDGE OF BANKRUPTCY AND DEFAULT BEFORE A LAST-MINUTE AGREEMENT BY EU

ROMANIA’S PREMIER BUSINESS MAGAZINE

JULY, 2015 / VOLUME 19, ISSUE 7

LEADERS » PAGE 6

GROWTH ON THE HORIZON Business Review explores the major developments on the office, industrial, commercial and residential markets since the beginning of the year and shares the pundits’ forecasts for the remainder of 2015 » page 12

ENERGY

PHARMA

Power up

Remedies reduced

Nuclearelectrica is entering the ﬁnal phase of negotiations over the construction of units 3 and 4 of the Cernavoda nuclear power plant

Romanians now pay the lowest medicine prices in Europe, after the authorities instituted price cuts of up to 20 percent for some drugs on July 1

» page 28

» page 10

www.business-review.eu Business Review | July 2015

EDITORIAL 3 Contents

EDITORIAL Anda Sebesi EDITOR-IN-CHIEF

3 6 9 10

Sustainability is the key With Greece being the big news in the last month, every businessperson should start to realize that sustainability is the main factor behind the healthy growth of a business. It is apparent to all how a developed economy became a nearly insolvent one, risking exit from the Eurozone and maybe even the European Union. Furthermore, at European level there is tension between countries that have adopted tough reforms (like Portugal, Spain and Ireland), those that don’t want to finance unsustainable deficits (especially northern countries) and Greece, France and Italy. In other words, sustainability is a business card, a credential for any economy or enterprise, which makes it rise or fall. Put simply, having a clear strategy for the future and the willingness to take some tough measures are among the many things that a decision maker should consider. And on the local economy, sustainable growth is the name of the game for the Romanian real estate market and all its segments in 2015 – residential, industrial, office and retail. After posting the first signs of growth in 2014, the local residential market confirmed this trend in the first half of this year. Market representatives are expecting stable development through to yearend. One welcome change is that the market is becoming increasingly mature, raising hopes of a sustainable growth cycle ahead. So, sustainability comes with maturity. Pundits say that the need to innovate on the local retail market is mostly a response to local shoppers becoming more mature. Consumers are spending more wisely and looking for value for money instead of expensive brands. They are really focused on getting what they need, which is probably the result of years of crisis. Sustainability also informs corporate and individual social responsibility. It is more than just getting involved in communities; it’s also about environmental protection and a behaving responsibly in this regard. While the country has made some big steps, waste collection is still difficult in Romania. At the moment, recycling plants receive less than 10 percent of the locally produced waste. Players say that Romania cannot make significant progress towards reaching its selective waste collection target, which in 2020 will be 50 percent, without introducing a taxation system to discourage throwing away waste randomly at the garbage dump, and with no investments in collection infrastructure. Sustainability is also about having highly qualified human resources who perform in a healthy working environment. While it is not the single determining factor for an employee, salary remains one of the most important elements for them. Managers and experts working in fields such as IT, engineering, sales & marketing, crude oil and natural gas extraction currently command the highest pay. At the opposite pole are those working in hotels and restaurants, security and production. Who could do with greater sustainability. anda.sebesi@business-review.ro

EDITORIAL HIGHLIGHTS HR PHARMA

12 COVER STORY 15 18 20 21 ENTREPRENEUR 26 ENERGY 28 MARKETING

34 INTERVIEW 36 GREEN CORNER 38 TRAVEL 42 EXPAT EYE 43 FILM REVIEW 44 CITY

Sustainability is the key Greece on the brink Local salary growth decelerates Lower drug prices may deal new blow to pharma sector Ready and steady: office market ‘heading upwards’ More growth and consolidation ahead for industrial market Growing retail sales spur developers to re sume investments Number of new apartments to go up by yearend Smart move: pioneering experience pack ages on the local market Homes and businesses endure gas price hike as market liberalization continues Roaring success: Cannes Lions 2015 blurs lines between creativity, technology and en tertainment GreenCorp co-founder: ‘There are not enough waste collection points’ Wienerberger completes first zero energy consumption house Thuringia – a visit to the heart of Germany Brewing up progress in Bucharest’s coffee shops The salt of the Earth Timisoara turns up the tempo

ISSN No. 1453 - 729X PUBLISHER Bill Avery EDITOR-IN-CHIEF Anda Sebesi DEPUTY EDITOR-IN-CHIEF Simona Bazavan EDITORS AT LARGE Anca Ionita, Simona Fodor JOURNALISTS Otilia Haraga, Tatiana Lazar, Laura Grigore, Romanita Oprea, Natalia Martian COPY EDITOR Debbie Stowe PHOTO EDITOR Mihai Constantineanu LAYOUT Raluca Piscu PUBLISHER Bloc Notes Media ADDRESS No. 10 Italiana St., 2nd ﬂoor, ap. 3 Bucharest, Romania

EXECUTIVE DIRECTOR George Moise BUSINESS DEVELOPMENT DIRECTOR Oana Molodoi SALES & EVENTS Ana-Maria Nedelcu, Oana Albu, Valeria Cornean MARKETING Anamaria Radu PRODUCTION Dan Mitroi DISTRIBUTION Eugen Musat LANDLINE Editorial: 031.040.09.32 Oﬃce: 031.040.09.31 EMAILS editorial@business-review.ro sales@business-review.ro events@business-review.ro

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4 NEWS

NEWSin brief AGRICULTURE Romania lags behind in organic food consumption To supply office buildings with air conditioning in summer costs companies in Romania between EUR 0.7 and EUR 1.2/sqm/month, according to analysis by ESOP Consulting. The study covered 750 office buildings and over 2,000 villas. The lowest costs per sqm for air conditioning in summer are incurred in green buildings, while old villas generate the highest expenses. In 2015, cooling offices for employees in the hottest months costs between EUR 120/month for a space of 100 sqm in a villa, and EUR 9,000-12,000/month for 10,000 sqm in a class A office building.

AUTO Ten percent more cars registered in H1 The local car market rose by 10 percent

during the ﬁrst half of 2015, according to a study by Autovit.ro, which works out as an increase of 3,000 cars year on year. June, with more than 8,500 registered vehicles, was the best month since November 2011. The results of the scrappage program Rabla began to take effect in June and encouraging preliminary data suggest the scheme will continue posting good results during the coming months.

CONSTRUCTION Office air conditioning costs firms up to EUR 1.2/sqm/month To supply office buildings with air conditioning in summer costs companies in Romania between EUR 0.7 and EUR 1.2/sqm/month, according to analysis by ESOP Consulting. The study covered 750 office buildings and over 2,000 villas. The lowest costs per sqm for air conditioning in summer are incurred in green buildings, while old villas generate the highest expenses. In 2015, cooling offices for employees

in the hottest months costs between EUR 120/month for a space of 100 sqm in a villa, and EUR 9,000-12,000/month for 10,000 sqm in a class A oﬃce building.

CONSUPTION Local economic expectations stay positive, says GfK Local consumers expect economic growth, although economic forecasts declined by 1.1 points to 21.3 points in the second quarter, according to a GfK consumption climate study. Year on year, June brought a signiﬁcant gain of nearly 32 points in the economic growth index, the study found. Under favorable economic conditions, Romanians also expect a slight increase in wages. The economic outlook index stood at 18.5 points in June.

ENERGY Lukoil denies plans to close

local refinery After denying accusations of money laundering, tax evasion and PetrotelLukoil de-capitalization, Lukoil has stated its intention to remain active in Romania, where it says its general business is going well. “We do not have plans to close the refinery, but if the seizure comes into action, we might have to,” said Thomas Mueller, vice-president for refining, Lukoil. The company also said the operations of the refinery in Ploiesti would not be affected by the ongoing investigation.

HEALTHCARE Romania has few medics, says Eurostat Romania has low numbers of qualiﬁed medical personnel, with a higher proportion of women than men working in the ﬁeld and a high rate of hospitalizations, compared to the other EU members, according to a study released by Eurostat. One of the key indicators for measuring healthcare personnel is the total number of physicians, expressed per 100,000 inhabitants. Romania, with 52,362 practicing physicians, has fewer than 270 per 100,000 inhabitants, one of the lowest levels in the EU, along with Slovenia and Poland.

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INFRASTRUCTURE Press Square underpass opens to traffic The Press Square underpass in Bucharest was opened to traffic on July 19. With a length of about 800 meters, two inputs and one output, it is expected to streamline traffic in the area by 30 percent. Construction, which was completed two months behind schedule, required an investment of RON 60.4 million (EUR 13.7 million), VAT not included. The underpass is located at the intersection of four busy streets – the Bucharest-Ploiesti highway, Kiseleff Boulevard, Marasti Avenue and Poligrafiei Boulevard.

IT Deutsche Bank’s local IT center reaches 300 staff Deutsche Bank has announced that its technology center in Bucharest, DB Global Technology, has crossed the 300 employee milestone, ahead of schedule. Over 100 IT&C specialists from various IT ﬁelds have been hired in the last four months. The technology center has been operational since January 2014 and is projected to create up to 500 IT&C jobs by 2016. It develops software for the bank’s global operations and is a platform for software engineers.

MACROECONOMICS Commercial deficit up 12 pct in first 5 months Romania’s commercial deficit has increased by 12 percent in the first five months of 2015 after free on board (FOB) exports amounted to EUR 22.26 billion and cost insurance and freight (CIF) imports totaled EUR 24.8 billion, according to data from the National Institute of Statistics (INS). The FOB‐CIF commercial deficit was EUR 2.5 billion, EUR 272.5 million more than the figure registered in the first five months of 2014. In May 2015, FOB exports stood at EUR 4.4 billion and CIF imports at 5.03 billion, leading to a commercial deficit of EUR 547.3 million.

MEDIA Print press advertising down by 5 pct in H1 y-o-y Investments in print press advertising fell to EUR 61.3 million (rate card) in the ﬁrst half of 2015, a 5 percent drop year on year, according to a study by the Romanian Transmedia Audit Bureau (BRAT). The study analyzed continuously publishing press between January 2013 and June 2015, identifying a slight decrease in the volumes invested in the print press, as compared to the growth

NEWS 5 registered at the end of 2013 and throughout 2014. The ﬁrst half of 2014 brought advertising investments of EUR 64.4 million and the second half an increase to EUR 73.8 million, only to drop in H1 2015.

ONLINE Romanian Post expands into e-commerce market via eMAG partnership The National Romanian Post has announced the start of an alliance with eMAG in a bid to expand operations into e-commerce. The partnership involves the delivery of eMAG orders via post oﬃces, from where products can be picked up. The project is in its pilot phase, with two post oﬃces offering this service at the moment, the Buzau 7 and Targoviste 4 branches. The strategy is to roll out the service (Postcollect) in all 800 branches with virtual private network (VPN) access, which will have dedicated counters and longer opening hours in the evenings and at weekends.

REAL ESTATE AFI Europe receives EUR 39 mln loan for AFI Park 4&5 in Bucharest AFI Europe has signed a financing agreement totaling EUR 39 million to complete the construction of the AFI Park 4&5 office building, according to company representatives. The loan, from Bank Leumi Romania, is designed to help with the completion of the fourth phase of the office project in Bucharest. AFI Park 4&5 totals 32,000 sqm (GLA) of class A office space, while the entire project covers some 70,000 sqm (GLA).

Bucharest property prices decline by 1.8 pct in H1 Bucharest is the only big city where asking prices for apartments fell during the ﬁrst six months of the year, according to a study by Imobiliare.ro. Compared to the average asking price of EUR 1,066 per sqm in December 2014, the indicator recorded a drop of 1.8 percent, to EUR 1,047 per sqm in June 2015. The ﬁgure was also down by 0.9 percent from EUR 1,056 per sqm in May.

Ikea buys 33,600 hectares of local forest Ikea has bought 33,600 hectares of forest in Romania from a Swedish company, Greengold, led by the former local partners of the University of Harvard. This is the ﬁrst acquisition of its kind carried out by the Swedish furniture giant worldwide and makes the furniture and furnishings retailer the largest owner of forest in the country.

WHO’S NEWS BR welcomes information for Who’s News. Submissions may be edited for length and clarity. Get in touch at simona.bazavan@business-review.ro

Burcin Atakan

Cristina Mihaila

has been appointed audit partner at EY Romania. He began his career with the firm in 2007 as manager in the fraud investigation services department in Istanbul. He transferred to Bucharest in 2011 as leader of the local fraud investigation department, subsequently becoming managing director in 2012. Atakan has over 19 years of experience in this field and has held leading positions in Turkish financial institutions such as Halkbank and Pamukbank.

is Citi Romania’s new executive director of communication. She has over seven years of professional experience in banking, specializing in media relations, PR, CSR, domestic communication and corporate marketing. Her most recent position was that of communications manager at UniCredit Tiriac Bank. Mihaila has previously worked as director of communication and marketing for RBS Romania, where she was part of the bank’s board from 2012 until the spring of 2015 after having joined the lender in 2008.

Felicia Gavrila has been appointed audit partner at EY Romania. She joined the firm in 2006 and became executive director in 2013. Despite having worked mainly in audit, Gavrila has also covered projects in related services. Since the second half of 2014, she has focused on specific sectors such as real estate and energy. In January 2015 she joined EY’s regional work group for capital markets, at Central and Southeastern European level.

Bogdan Ionita has been appointed strategy director for Lowe. In this capacity, he will coordinate its research, planning and strategy teams, covering all communication areas: traditional, digital, BTL and experimental. Ionita has previously worked for Gothaer, Johnson&Johnson, Scandia Food, Unilever, Veka and Zizin, and has contributed to expanding the company’s portfolio with new clients, such as AFI Palace Malls and Skol. He has worked in local and international agencies, for brands in various industries, such as telecom, beer, chocolate, energy drinks, baked goods and tobacco.

Carlos Luque Larena is the new IT&C director at Enel Romania. He joined the company in 2006, as part of the infrastructure projects department, and has over 16 years of experience in the field. Larena graduated in technical engineering in computer science from the Oberta de Catalunya University in Barcelona. He replaces Dan Crisfalusi, who has taken over other responsibilities within Enel Group.

Dana Noujeim is the new managing partner of executive search company Alexander Hughes Romania. She has been with the firm since 2008 as business development director and is now replacing Dana Patrichi. Having worked for over 20 years in HR, headhunting and business, Noujeim has had extensive multinational and startup experience.

Radu Rasinar has been appointed president of the Local American Working Group (LAWG). Rasinar, general director of AstraZeneca, is replacing Gabor Sztaniszlav, Amgen country manager, who will now serve as vice-president. The management of the association also includes Fabrizio Giombini, Merck Sharp & Dohme country manager, who is secretary general. A doctor by profession, Rasinar has extensive experience in the pharmaceutical industry, both in Romania and internationally, in Europe and Asia. In Romania, he has worked as a manager in the marketing department of Eli Lilly and subsequently held the position of country manager at the same company for two years. He has been head of AstraZeneca Romania since 2009.

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6 HiGHLiGHTS

Greece on the brink With total debt of over EUR 320 billion, of which 65 percent is to Eurozone and the IMF and 8.7 percent to the European Central Bank (ECB), Greece was teetering on the edge of bankruptcy and default before a last-minute agreement by EU leaders. While member states and international financial institutions try to find a way to avoid a so-called “Grexit”, Greece is being pressed to undertake deep economic reform.

Helping handout: international creditors are trying to steer Greece away from bankruptcy

∫ AndA SebeSi This is not the ﬁrst time when Greece has faced such a big challenge. Existing market data indicate that the Greek economy was in technical default back in 2012, restructuring a sovereign debt of over EUR 120 billion. The difference is that that time it was saved by its European creditors. Recently, White House spokesman Josh Earnest said that it was in “the collective interests” of Europe and the United States that Greece reached a new bailout deal with its lenders, with Athens agreeing to “a package of reforms”. President Obama also spoke to

President Francois Hollande of France regarding the latest developments in Greece and their impact on the whole Eurozone. “The two leaders agreed on the importance of finding a path forward that will allow Greece to resume reforms and return to growth and sustainability within the Eurozone, recognizing that this will require difficult compromises from all sides,” said White House officials. In a July 5 referendum, voters rejected the terms of an international bailout. Figures published by the Interior Ministry indicated 61 percent voted “no”, and 39 percent “yes”. Some European officials had said that a “no” vote would be seen as an outright rejection

of talks with creditors. But Greek government officials insisted it would strengthen their hand and that they could rapidly strike a deal for fresh funding in resumed negotiations. Speaking before Greece and EU leaders struck a new deal on 13 July, Hari Tsoukas, professor of Organizational Studies in Athens at Warwick Business School, said, “The recent referendum in Greece has made it difficult for PM Alexis Tsipras to compromise with creditors. If he really wanted a better deal for Greece, he should never have called the referendum in the first place. Now, for his proposals to form a sound basis for negotiations with creditors, who narrow-mindedly stick to

harsh austerity, demanding unrealistic primary surpluses and refusing to seriously consider debt relief, Tsipras needs to accept austerity, especially if a commitment to debt relief is given to him. But austerity is what Greek voters emphatically rejected. He has imprisoned himself in a paradoxical situation.” Most markets around the world, including those in Europe, fell because of the ﬁnancial uncertainty created by the Greek vote. In addition, international ﬁnancial markets consider Greece an insolvent economy. Tsoukas added, “Greece is on its way out of the Eurozone and maybe of the European Union. Trusting Tsipras’s assurances, Greeks overwhelmingly

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voted for two contradictory choices in last week’s referendum: against austerity and for Greek membership of the Eurozone. However, the two parts of this mandate, rightly or wrongly, have turned out to be incompatible.” He went on, “Membership of the Euro demands sacrifices like austerity and structural reform – for an uncompetitive economy operating in a badly designed single currency with no common fiscal policies, nor common political institutions. Excruciating austerity made the Greeks identify the Euro with economic misery, while the political system and organized interests have either opposed or at best grudgingly accepted reforming a clientelist state (one rife with the exchange of goods or services for political support and a protectionist economy). All along, both Greece and its creditors have refused to see the big picture – the protection of the Eurozone.” The International Monetary Fund (IMF) said recently that it was prepared to work with Athens and its European creditors to help resolve Greece’s debt crisis now that a conditional agreement has been reached on a new bailout. Spokesman Gerry Rice said the fund’s managing director, Christine Lagarde, had briefed the global lender’s board on the outcome of the latest talks. “The IMF stands ready to work with the Greek authorities and the European partners to help move this important effort forward,” he said in a brief statement. According to the IMF country report released on July 14, Greece’s public debt has become highly unsustainable. This is due to the easing of policies during the last year, with the recent deterioration in the domestic macroeconomic and financial environment because of the closure of the banking system adding significantly to the adverse dynamics. The report shows that financing needs through to end-2018 are now estimated at EUR 85

HiGHLiGHTS 7 billion and debt is expected to peak at close to 200 percent of GDP in the next two years, provided that there is an early agreement on a program. Greece’s debt can now only be made sustainable through debt relief measures that go far beyond what Europe has been willing to consider so far, according to the IMF.

How bad are things for Greece’s pension fund? Greece has worked to reform its pension system over the last few years. In 2011, it was discovered that 1,473 people had received pensions totaling millions of dollars – despite being dead. Reforms and tighter spending controls in recent years had also led to improvements, with Greece spending 2 percent less of its GDP on pensions in 2014 than 2012. But pensions have remained one of the main obstacles in negotiations between creditors and the Greek government in recent months. Before January’s election, Tsipras promised not to cut pensions again. According to the BBC, quoting Greece’s PM, the amount of money held in pension funds has dropped significantly – down EUR 25 billion in the last five years. In addition, more than a fifth of Greece’s population are pensioners. Only two countries in Europe have a higher percentage. The BBC also reported that youth unemployment stood at 49.7 percent – so pension funds are not receiving enough new contributions from the working population. In 2012, the last year for when statistics are available, Greece spent 17.5 percent of its GDP on pensions, compared to 7.3 percent in Ireland.

Reform list The agreement to save the Greek economy hammered out at the recent Eurozone summit forces Greece to rapidly adopt some vital reforms that the local authorities have delayed putting into practice. They also need to accept meticulous monitoring from interna-

What the IMF says Recent events – the closure of banks and imposition of capital controls – are exacting a heavy toll on the banking system and the economy, leading to a further significant deterioration in debt sustainability relative to what was projected in the IMF’s recently published Debt Sustainability Analysis (DSA). The report, released on July 14, found that a full and comprehensive revision of the debt sustainability analysis can only be done at a later stage, given the deterioration in the economic situation as a result of the closing of the banking system and the details of policies yet to be agreed. However, it is already clear at this stage that there will be a significant increase in Greece’s financing needs. l Debt would peak at close to 200 percent of GDP in the next two years. This contrasts with earlier projections that the peak – at 177 percent of GDP in 2014 – has already passed. l By 2022, debt is projected to be at 170 percent of GDP, compared to an estimated 142 percent of GDP projected in the published DSA. l Gross financing needs would rise to levels well above the last review (and above the 15 percent of GDP threshold deemed safe) and continue rising in the long term.

OPiniOn dragos Cabat Managing partner, RisCo

Greek tide reaches Romanian shores

Any problem of such dimensions faced by an EU member affects mainly the “weaker” members of the alliance. Although Romania has posted remarkable financial results lately it remains in this category. The financial sector is the main sufferer because Greek financial institutions have significant weight in Romania. Another factor is the value of the RON versus the EUR and the EUR versus the USD. Investments in the EU will suffer, especially in the less developed countries, and mainly the Balkan ones. Investors can no longer benefit from the safety net that EU membership could offer and will pay more attention to any side-slip of the country they intend to invest in. Foreign investors will avoid Romania before the situation in Europe stabilizes, because of its political and legal problems, including corruption and recent changes to the Fiscal Code. In addition, there are both a significant number of Romanians who work in Greece and Greek companies that operate in Romania. Financial and capital circulation limitations will have a

tional creditors. Nineteen members of the Eurozone agreed that in addition to the aid offered through the European Financial Stability Mechanism (ESM), Greece must appeal to the IMF for technical and ﬁnancial assistance. In addition, the Greek government had a long list of measures it had to take by mid-July, such as increasing VAT, adopting the legal framework for pension system reform and creating a ﬁscal authority. In addition it was obliged to adopt the civil procedure code by July 22 and transpose the di-

negative impact on the companies that are active in Romania and on the incomes of Romanians that have a job in Greece. Unfortunately the recent decisions about the Greek situation just buy some time in the short term. Until the Greek economy registers sustainable growth and investors become comfortable with its capacity to pay its debts in a decent period of time according to the schedule set up with international institutions, the current situation will not be solved. Resolution will just be delayed. At European level there is tension between countries that have adopted tough reform measures (like Portugal, Spain and Ireland), those that don’t want to finance unsustainable deficits (especially northern countries) and Greece, France and Italy. Businesspeople don’t appreciate such tension and the GDP of the European economy will probably drop by about 0.3 percent even though the Greek situation seems to be solved on the short term. Emerging countries’ capital markets will probably suffer because of the economic crisis in Greece, while currencies (including the EUR) will drop versus the USD. However, some capital markets in countries performing above the EU average could see positive developments, acting as anchorage markets for investors who have a higher aversion to the risks of the Eurozone. The Romanian market will feel a negative impact, albeit limited by its reduced liquidity, small exposure to the local market and summertime, when active investors on the local market are on holiday. anda.sebesi@business-review.ro

rective on the restructuring and dissolution of credit institutions into Greek legislation. Then, Eurozone governors could mandate the ESM, European Commission (EC) and ECB to negotiate a new memorandum of understanding that would include the terms of a third ﬁnancial assistance program. In addition, the latest reforms proposed by the Greek government must be consolidated and completed with measures such as applying a zero deﬁcit provision, the privatization of the electricity supplier and moderniza-

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8 HiGHLiGHTS

Greek tourism feels the pinch The crisis has deterred holidaymakers, according to the Hellenic Association of Tourism Companies (SETE). SETE chief Andreas Andreadis announced earlier this month that hotel reservations were down by 50,000 daily. There has also been a wave of booking cancellations since July 27, while Greeks are making almost no reservations. If things do not improve, this is expected to deal a strong blow to the local tourism market. Flight reservations are also down by almost 50 percent. As for Romanians, most of their holidays to Greece are packages, including prepaid services – transportation, accommodation, transfers, guides, meals in the half board or all inclusive system. Local Romanian travel agency Paralela 45 has set up some fallback options for tourists, providing them with an emergency phone number, agency representatives in holiday destinations, as well as financial support should issues arise. In addition, the agency advises tourists to have cash on them – about EUR 100 per day for a family of four. The Romanian Ministry of Foreign Affairs also warned tourists going to Greece they should take cash, due to the closure of the banks and cash controls by the Greek state.

tion of the collective negotiation system. Meanwhile, Tsipras agreed to create a fund to which all “valuable assets” to be privatized should be transferred. The fund will be set up in Greece and managed by the Greek authorities under the monitoring of European institutions. The ﬁnancial resources generated by the sale of these assets will be used to repay the new credit supplied through the ESM, up to EUR 50 billion.

In addition, all the legal proposals for the relevant ﬁelds should be discussed with the European institutions before being sent to the Greek Parliament. In exchange for all these economic measures, the European partners accepted that Greece’s ﬁnancial needs are between EUR 82 and 86 billion, and approved urgent credit of EUR 7 billion in addition to EUR 5 billion. Pundits say that the European partners are open to

considering additional measures but have ruled out another cancellation of Greece’s external debts. In order to support Greek economic growth and job creation, the European Commission will assist the Greek government in the next three to ﬁve years in order to use the EUR 35 billion of European funds effectively. Erste Group analysts say that the Greek crisis doesn’t pose a signiﬁcant

economic risk to Central and Eastern European countries. “Their exports to Greece represent about 0.1 and 0.5 percent of GDP. As for Romania, the exports-GDP ratio is just 0.5 percent. In addition, the Romanian banking system is very liquid and well capitalized,” they say.

anda.sebesi@business-review.ro

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HR 9

Local salary growth decelerates Managers and experts working in fields such as IT, engineering, sales & marketing, crude oil and natural gas extraction have the winning tickets on the labor market at the moment, commanding the highest pay. At the opposite pole are those working in hotels and restaurants, security and production. As expected, Bucharest still tops the regional salary league.

The average gross salary in Romania totaled RON 2,500 in May 2015, 2.5 percent down on the previous month

∫ OTiLiA HARAGA “Over the past two years, salaries have risen by between 3 and 5 percent, depending on the industry and seniority level, according to the Mercer Salary Survey. In 2015, we predict average salary growth of 4.5 percent, down from 5 percent last year,” Roxana Feregan Marin, consulting manager at Consulteam Romania, tells BR. She adds that salaries have climbed across all sectors, but the degrees differ from one industry to another. “However, we have identiﬁed so far that 3 percent of companies have frozen salaries this year and are no longer giving their employees raises,” she says. Bucharest still tops the list of the cities with the highest salaries. The capital is followed by Ilfov and Ploiesti, and by cities in the west and center of the country – Cluj-Napoca, Timisoara, Sibiu and Brasov. More and more IT&C and BPO companies, shared service centers and automotive ﬁrms have opened branches in these towns, boosting the standard of living and employment opportunities, say pundits. The average gross salary in Romania totaled RON 2,500 in May 2015, 2.5 percent down on the previous month, according to data from the National Institute of Statistics (INS). The average net salary per month stood at RON 1,806, down by 2.7 percent or RON 51,

against the month before. Employees working in the extraction of crude oil and natural gases earned the highest salaries in May, of RON 6,523 net on average. At the opposite pole, employees in hotels and restaurants made on average RON 1,018 net. Compared to May 2014, the net average salary increased by 7.4 percent, according to INS data. However, in May 2015, the average net salary was lower than in April, due to bonuses and gift vouchers granted in April and also production yield and higher profit on some contracts. The most significant boost in the average net monthly salary, at 29.7 percent, was netted by crude oil and natural gas extraction employees. There were also hikes of between 4.5 and 8 percent in the net monthly salaries of employees working in cokery production and the manufacturing of products coming from the processing of oil, sylvan and forest exploitation (including fishing and aqua-farming), extraction services and air transport. Last but not least, there was 3 to 3.5 percent growth in the pay of employees involved in activities that are auxiliary to financial intermediations, insurance and pension funds, terrestrial transport, pipe transport, cinema and video production and television programs. “At a glance, the answer comes naturally: people working in top management positions earn the most on the

Romanian market. However, there are certain expert or specialist positions in some fields able to command as much as managers in multinational companies. For instance, at the moment, the IT&C market is fiercely competitive: a Java developer can earn a gross salary of between EUR 900 and EUR 2,400 per month, depending on seniority,” says Feregan Marin. Firms are currently especially looking for specialists in engineering, sales and marketing, and IT. “Companies are facing difficulties when they must recruit both specialists and managers in the same field,” adds the Consulteam representative. In the private sector, employees’ packages can extend way beyond the salary. Employees benefit from life insurance, medical services at private clinics, subscriptions to sports and health clubs and training programs. “The Romanian market has greatly developed in this direction and both companies and employees are placing more and more focus on the benefits package,” says Feregan Marin. The higher demand for IT&C specialists has generated fierce competition in this area of the labor market. As a result, benefits packages are becoming more and attractive, found the IT&C salary survey carried out by Consulteam. The Mercer survey on salary growth in the first half of the year looked at the pay of developers of programming lan-

guages such as Java, .Net, C++ and PHP. It found that salaries in the IT&C sector have grown on average by 4.5 percent. A similar hike is expected next year. Overall, salary rises in the sector exceeded the 2.2 percent inflation rate. At regional level, outside Bucharest, Cluj-Napoca has been of increasing interest to IT&C employers. Even though salaries in the capital are still higher than in other cities, the gap is gradually narrowing. Right now, a Java developer in Bucharest commands an average of 18 percent more than her counterpart in Cluj-Napoca. “In the IT&C industry, apart from the usual benefits, there are some less common ones, compared to other sectors of activity, such as: an in-house cafe, fresh fruit and beverages, gaming areas, modern headquarters conceived to feature relaxation and socializing spaces, catering or a dedicated chef for lunch, parties and team building sessions and investments in CSR projects selected by employees,” Feregan Marin tells BR. The most significant drops in net average salary were suffered by individuals working in insurance and pension funds (except for the public social insurance system), where salaries decreased by as much as 15.7 percent, according to INS data. Slumps of between 10.5 and 13 percent hit remuneration across the financial intermediation area (except for insurance and pension funds), manufacturing, other means of transport, the collection and purification of used water, metal ore extraction, coal extraction and the manufacturing of other non-metallic mineral products. Employees working in the production and supply of electric and thermal energy, gas, hot water and air conditioning, beverage manufacturing, the metallurgic industry, water transport, telecommunications, water treatment and distribution, and professional, scientific and technical activities also endured pay cuts of between 6.5 and 8.5 percent, according to INS figures. These came because production plans were not achieved or revenues were lower, while in some sectors of the economy, staff members were hired on very low pay. “The jobs with the lowest salaries include cleaners, production workers, people who stock merchandise and guards. Their pay starts from the minimum gross salary, which is RON 1,050, and can reach RON 2,200 per month,” Feregan Marin tells BR. otilia.haraga@business-review.ro

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10 PHARMA

Lower drug prices may deal new blow to pharma sector Romanians will pay the lowest prices for medicine in Europe from July 1, after the authorities announced price cuts of up to 20 percent for some drugs. However, both producers and associations representing patients are skeptical and warn that this is a trap that could hurt patients, the pharma industry and investments in the long run.

The value of drugs released to patients in Romania reached RON 3.27 billion in Q1, 2015, up by 10.7 percent compared to the ﬁrst quarter of 2014

∫ OTiLiA HARAGA “From July 1, Romania will have the smallest drug prices in Europe, as is natural given the socioeconomic background. Drug prices here cannot be similar to those in countries with a much higher GDP. Discussions have taken place with the European Commission and the IMF, drug producers, distributors associations and pharmacy chains to ensure that distribution is continuous, no supply problems occur and the entire procedure is completed,” said the Romanian healthcare minister, Nicolae Banicioiu. Under law 75/2009, the price of original drugs sold in Romania was not allowed to exceed the price at which they were sold in the following countries: Bulgaria, the Czech Republic, Hungary, Slovakia, Lithuania, Poland, Germany, Italy and Greece. However, over the past ﬁve years, this law has not been applied by pharma companies or the authorities. It was only at the start of 2015 that the Romanian authorities asked producers to update their medication prices by March 10. The new prices came into force with the publication of the National Catalogue of Drug Prices for Human Use (CaNaMED) approved for sale on the local market. The drop in prices is meant to save Romanian patients – and the state –

money. National Health Insurance House (CNAS) officials told the media that the updated prices, which could be 20 percent lower in some cases, would allow the difference to be spent on acquiring innovating products. Also from July 1, the Romanian healthcare minister announced that four new programs would be financed from the ministry budget, benefitting patients in a serious condition in hospital. However, the signals coming from pharma players, associations representing patients’ interests and experts in the pharma market are not equally optimistic. “Although the goal of the drug price reduction was to achieve considerable savings for the state budget, which will permit the inclusion of new products on the list of subsidized medicines, there may be negative effects down the line, considering the substantial impact this will have on the pharmaceutical market,” Anca Grigorescu, partner, head of healthcare & pharma at bpv Grigorescu Stefanica, tells BR. She adds that on the short term, pharmacies will be at a disadvantage as they will bear the losses for the medicines already in stock. “From July 1, pharmacies are required to lower their retail prices in order to comply with the prices established by the new CaNaMed, even though those medicines were bought at the old distribution rate. As such, there is a risk that

pharmacies will increase prices in the OTC (over- the-counter) sector, in order to cover these losses, since the price of OTCs may be freely established,” she warns. The anticipated long-term effects are even worse, in Grigorescu’s view. “In the long run, as the Romanian market becomes less attractive, several medicines which are no longer cost-effective may be withdrawn from the national market, or we may see an increase of trade within the European market. In addition, some players may exit the Romanian pharmaceuticals market,” she cautions. So far, revenues on the pharma market have increased above expectation, according to data on the first quarter of the year from the latest Pharma & Hospital Report released by Cegedim. The value of drugs released to patients in Romania reached RON 3.27 billion in Q1, 2015, based on the distribution price, up by 10.7 percent compared to the first quarter of 2014. However, this rise may have been induced artificially, as a result of state policy, rather than be a signal of a healthy market, according to the pundits asked by BR. “The evolution of the market was most likely driven by the government’s announcement of its plans to reduce drug prices. The goal of the executive to set the lowest medication prices in Europe caused major dissatisfaction among pharmaceutical manufacturers

and distributors, who said that such measures would force them to seek other more attractive markets and may lead to the disappearance of some specific medicines from the market. Naturally, the immediate reaction of patients was to procure the medicines they need, which ultimately triggered the growth,” Grigorescu tells BR. Medication released on prescription in pharmacies reached RON 2.27 billion, representing 6.7 percent growth, according to Cegedim. OTC medication released without prescription (overthe-counter) totaled RON 0.63 billion, up by 27.7 percent. Meanwhile, the hospital segment reached RON 380 million, up by 11.5 percent compared to the first quarter of the previous year, according to the Cegedim report. “The evolution in Q1 2015, although below the value posted in Q4 2014, was above our previous expectations. This was due to the performance of OTC products, especially seasonal ones, and, somehow paradoxically, due to the announcement of the reduction in drug prices and the introduction of the health card,” says Petru Craciun, general manager of Cegedim. He adds: “As a result, because of the price reductions announced recently, we are revising the market prognosis for 2015 from +3.5 percent to -2.8 percent, calculated in RON (...), but we wish to draw attention to a significant drop in the availability of cheap products in the second half of the year.”

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PHARMA 11

Anca Grigorescu, bpv Grigorescu Stefanica

Over the past 12 months, the total value of the market was RON 12.6 billion, representing 10 percent growth compared to April 2013-March 2014. Sales of drugs for the respiratory system grossed higher revenues, at 15.3 percent of the total, followed by drugs for the blood and hematopoietic organs, which represented 14.4, and those for the digestive tract and metabolism, on 11 percent. But this growth will be short lived and followed by major risks for the Romanian pharma sector, warn pundits. “2014 and the ﬁrst half of 2015 have seen modest investments and stagnation due to gloomy forecasts for the pharmaceutical industry, regarding the continuation of the clawback tax and the reduction of medicine prices. Considering that turnover decreases of 1520 percent on the national market are forecast for the main drug manufacturers, the lack of enthusiasm towards new investments is understandable,” Grigorescu cautions.

Pharma sector warns of dire long-term consequences of drug price drop The Romanian authorities say the patient is at the center of this policy, and that by slashing drug prices, more meds will become accessible to more patients. However, representatives of the pharma sector in Romania warn that the effect may be quite the opposite, and that the snowball effect will be hard to control. According to Laurentiu Mihai, executive director of the Association of Producers of Generic Drugs in Romania (APMGR), the cheap drugs on the market will be replaced with more expensive alternatives. “On the medium and long term, this effect will be felt strongly, both in the public healthcare system, where public expenditure on medication will surge, due to the disappearance of cheaper medicines, but especially by patients, who will have to cover co-payment for more expensive alternatives. While we do not exclude a growth in the value of the market, the number of days of treatment granted to patients, which is a more important indicator that reﬂects their access to therapies, will decline,” he tells BR.

The director also says that the number of patients with chronic conditions who will have access to treatment will decline. “The drop in prices may save money in certain situations, such as in some national health programs where treatment is limited to a few types of molecules and is 100 percent subsidized. But overall, against the background of the disappearance of accessible drugs from the market due to hostile economic conditions for local generic drug producers, we will treat fewer patients in Romania with more expensive drugs,” Mihai warns. The APMGR oﬃcial adds that market research has shown that following July 1, the total drop in the price of drugs will reach 9.4 percent for therapeutic drugs, while for the producers that sell in Romania and have generic drug manufacturing units, the decline will be 18 percent. Meanwhile, associations that represent patients’ interests are also skeptical that the price reduction will produce positive results in the long run, if certain conditions are not met. “We do not believe that the lowest prices in Europe will ensure access to medication, because commercial interests will take precedence over patients’ needs. We had the problem with parallel exports before July 1 and we do not see why this will not increase from now on, since these regulations do not favor the patient,” Radu Ganescu, president of the Coalition of the Organizations of Patients with Chronic Conditions in Romania (COPAC), tells BR. Parallel exports mean that medicines sold in Romania at very low prices are shipped abroad and sold on foreign markets at a mark-up. Ganescu adds: “The main effect that we are anticipating is the disappearance of various cheap and very cheap drugs from Romania, because producers and retailers are saying they no longer generate a proﬁt. This worries us deeply, since we do not see any involvement from the authorities in guaranteeing patients access to these medicines.” He also anticipates that certain drugs will no longer be brought onto the Romanian market under these conditions, even though they are innovative and

Laurentiu Mihai, APMGR

local patients need them. subsidization of and proof of eligibility Taking all this into account, Ganescu for medical services. The national concludes, “The victims will be first of health insurance card proves that the all the patients,” who will no longer holder is insured and also confirms their have access to the medication they presence at the provider of medical need. services. In previous media appearances, the The introduction of the cards was Romanian healthcare minister prommeant to reduce red tape and corrupised there would be drugs from all thertion in the medical sector. However, it apeutic lines on the market, even after has failed to yield the expected results the introduction of the new prices. He so far, according to the pundits canalso promised that parallel exports vassed by BR, who described its effects would be discouraged with “very drasin terms from “insignificant” to even tic penalties” which could also include “negative.” the withdrawal of producers’ licenses. “The impact of the introduction of the “These regulations must be applied national health card is still insignificant,” and accepted by everybody. I hope the says Mihai, who nevertheless hopes producers of generic drugs will not be that in the long run, the card will help greatly affected, and if they are, this will reduce fraud in the system, which at the be settled quickly. We must take into acmoment “is covered by drug producers count that the clawback tax will be paying the clawback tax.” lower if prices are lower. This is the first He adds, “The difference between time when the pharma market in Rothe benchmark budget of RON 1.5 bilmania has been regulated in accordance lion allocated every quarter to drugs to the European market,” said the minand the real quarterly consumption of ister. subsidized drugs, estimated at RON 2 However, producers complain that billion, also includes the fraud. These the clawback tax is too onerous and is are inherent in a system that is still ridthe main reason why investments in the dled with bureaucracy and lacking effisector have been stalling. cient control over the way the public “The lack of sustainability and premoney is spent,” he tells BR. dictability of the fiscal and legal measGrigorescu goes so far as to say that ures taken by the Romanian authorities the pharma market has been harmed by over the past few years have made the the implementation of the new instrucountry miss out on major investments. ment. She says that many citizens inImportant pharma producers have sured in the public health system have blocked investments of EUR 50 million not yet received their cards, and at some in the construction of production units medical facilities, staff are not properly in Romania, due to the continually intrained to use the system. creasing clawback tax,” says Mihai of “For sure, the system is beneficial to the APMGR. “The country runs the risk the CNAS since it ensures more efficient of significant deterioration in the ecocontrol over the expenditure incurred nomic independence of this strategic by the state budget. It has yet to be seen industrial sector, because local producif the patients, medical staff and pharers anticipate serious problems on the maceutical market will be positively afmarket this year, with a decline also in fected by the implementation of the the export figures – the only segment new system, a complete assessment of that has maintained the profitability of the impact of the cards being premature the production units in the country so at this stage. However, considering the far.” initial effects, namely the significant drop in the number of medical services introduction of the health that were settled and approved by the card has yet to show effects, CNAS, we may assume that the pharmaceutical market was negatively influsay pundits enced by the implementation of the Since May 1, the national health card new system,” she says. has been compulsory for every Romanian patient, becoming the only instrument that can be used for the otilia.haraga@business-review.ro

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12 COVER STORY

Pundits expect that by the end of 2015, total leasing activity will reach last year’s 300,000 sqm level, and some even forecast increases

Ready and steady: office market ‘heading upwards’ Sustainable growth is the name of the game for the local office market in 2015, say industry representatives after the first semester results. Total leasing activity is set to reach at least last year’s levels and some pundits predict growth. There is even talk of Romania coming up on the radar of new investors. ∫ SIMONA BAZAVAN Leasing activity involving office space has been on an upward trend for a couple of years now, and the first semester of 2015 was no exception, pundits say. The total office take-up for Bucharest in the first half of 2015 was up by 7 percent y-o-y, Andrei Drosu, research consult-

ant with JLL, told BR. “After a rather slow ﬁrst three months, demand started picking up, especially in the second quarter, when big names in the IT&C industry started to act,” he added. Three large transactions alone accounted for more than a third of the total market activity: Genpact pre-leasing 22,000 sqm in Hermes Business Campus, and Oracle leasing 10,000 sqm

in Sky Tower and pre-leasing 20,000 sqm in Oregon Park, he added. But more important than this increase is the fact that new demand, meaning new leases, pre-leases or the lease of additional space by existing tenants, has been growing by more than overall take-up. “New demand, as a share of total demand, is on an upward trend compared

to renegotiation deals and now represents more than a third,” Mihai Paduroiu, head of the oﬃce agency at CBRE Romania, told BR. Indeed, while total take-up stood at around 130,000 sqm in the ﬁrst six months, a similar volume to that reported during the same period a year ago, new demand was up by 18 percent from 54,000 sqm last year to 64,000

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sqm in 2015, Daniela Popescu, head of research at Colliers International Romania, told BR. “It is important to mention that this increase in net demand was mostly fueled by new companies entering the local market and the setting up of new divisions by existing players. Relocations to new oﬃces with a similar quality level were constant at around 44,000 sqm,” she noted. Another constant is that, as has been the case over the past few years, new demand is coming from newcomers in the IT industry, shared service centers, business process outsourcing providers and the expansion of existing players from the same sectors. Overall, pundits expect that by the end of 2015, total leasing activity will reach last year’s 300,000 sqm level, and some even forecast increases. “By the end of the year we will see a signiﬁcant evolution in demand and we estimate an increase of over 20 percent in leased volumes. And this is good news as it shows many local companies are getting healthier,” Andreea Paun, associate

COVER STORY 13

director with the oﬃce agency of Colliers International Romania, told BR.

Dreaming of a landlord’s market Between 100,000 and 120,000 sqm of new office space is expected to be delivered in 2015 in Bucharest, similar to the volume reported in the previous two years. Given that overall demand has remained relatively constant, the average vacancy rate for Bucharest is not expected to undergo significant changes through to the end of the year, say pundits. The 27,000 sqm City Offices project developed by Globalworth in southern Bucharest and Skanska’s 17,700 sqm Green Court building B in FloreascaBarbu Vacarescu were the main projects delivered in the first half of 2015. The largest due to follow by yearend is AFI Park 4&5 (32,000 sqm), according to JLL data. “We do not expect significant fluctuations in the vacancy rate by the end of the year, mainly because many of the large pre-leases concluded this year are

for buildings that will be delivered next growth and an overall improving peryear, while the delivery of some projects ception – the vacancy rate will probably in 2015 with large unoccupied spaces not go up by much. It will remain conwill most likely be covered by the high stant, if not even drop, but either way there will not be any sudden changes,” new demand,” said Drosu. The overall vacancy rate in said Stefan Tudos, leasing manager at Bucharest stands at about 13 percent at Genesis Development, during BR’s 14th present, but there are considerable dif- Realty event this June. Rents too are predicted to remain ferences between the types of buildings and the areas where they are located. relatively stable until the end of the year For class A office spaces, for example, and there are even hopes of increases. the vacancy rate stands at about 6 per- “We have already seen an increase in cent, according to Paduroiu, while in prime rents from EUR 18/sqm/month to the Barbu Vacarescu-Floreasca area, EUR 18.5/sqm/month said the CBRE currently the capital’s hotspot address representative. Tenants’ expectations of rents and for office headquarters, it is expected to the packages offered by owners are in drop below 5 percent, said Paun. Even on the longer run, the vacancy relative balance, say market representarate should remain relatively constant, tives. “The market has definitely stabidespite the fact the volume currently lized and rents I believe can no longer expected to be delivered in 2016 is drop. Moreover there is a trend towards about 300,000 sqm, almost three times growth. This is no longer entirely a tenant’s market,” said Tudos. above this year’s figure. “Bucharest’s per capita office stock represents around 30-35 percent of that Where are the investors? of cities like Prague and Warsaw. Given After the investment volume in real esRomania’s business attractiveness at tate assets reached a whopping EUR 1.2 present – fiscal incentives, economic billion last year, up from EUR 300 mil-

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14 COVER STORY

Stefan Tudos, leasing manager at Genesis Development

lion the previous year and the highest level since 2007, expectations are that in 2015 it will come close to EUR 1 billion, according to JLL data. Given that so far the volume has been below EUR 100 million, the remainder of the year should be a very active one for investors. But more important perhaps than the actual volume of investments would be the entrance onto the local market of new players, say industry players, as for the past couple of years, investments in the acquisition of real estate assets have been mostly split between two investment funds – New Europe Property Investments (NEPI) and Globalworth Real Estate Investments, which is controlled by Greek businessman Ioannis Papalekas. Pundits say that the premises are now there for this to change. “I’m very glad to see that there are increasingly more investors who, although they might not enter the local market for the next six months or year, are considering Romania for the first time in about seven years. There is money and everyone feels the pressure from them. Bank deposits and bonds don’t offer an attractive return. On the other hand, real estate offers a relatively safe alternative and Romania is becoming increasingly interesting,” said Silviana Badea, head of capital markets at JLL, during this year’s Realty event. Georgiana Andrei, director of the office & retail agency at Colliers International Romania, talked during the same event of concrete offers coming from players that are either not present locally or have been active in Romania but haven’t bought anything since 2008. However, despite this interest, many of the reasons that have so far prevented large investment funds from buying properties in Romania are still valid. One problem remains the ratio between yields and the level of interest rates for financing investments, which makes Romania less attractive than

countries like Poland. Lack of predictability regarding rents is part of the problem. “Large investors come the moment they know they can count on a constant and predictable rent level on the long run. Given that locally contracts are closed for periods of about five years and there is great flexibility for tenants, it is less likely that a large investor will be attracted. On more mature markets contracts are closed for 10 or even 15 years and investors can rely on a constant revenue flow. We still need to

Silviana Badea, head of capital markets at JLL

most active firms expanding outside is expected to post a considerable inBucharest. Last year they generated 70 crease this year, albeit partly because percent of office demand, while the reregional office markets in Romania are maining 30 percent came from indusconsiderably underdeveloped comtrial and manufacturing companies. pared to countries like Poland or the And the outlook remains positive. Czech Republic. Nevertheless, last year’s record de- “Demand from the IT and telecom secmand for office space in regional cities tors is becoming more sophisticated. such as Timisoara, Cluj-Napoca and Iasi While between 2006 and 2009 Romais projected to go up by about 30 per- nia was interesting for setting up call cent by yearend to around 80,000 sqm, centers, in 2015 we can talk about demand for software, hardware, financial according to DTZ Echinox data. Some 25,000 sqm of office space and marketing specialists. We now have was leased in the first quarter alone and centers in Romania that are servicing operations from Europe and all over the world,” added Galatanu. High demand is also reflected in an average vacancy rate of around 5 percent in most regional cities, while headline rents average EUR 8-11/sqm/month, with a lower level in Brasov of between EUR 7 and EUR 9/sqm/month, according to the report. Developers are keeping pace with the growing demand. In 2014 the modern stock of office space in the main cities outside Bucharest increased by 10 percent, reaching a total of 493,000 sqm. New deliveries amounted to 43,000 sqm, out of which 83 percent was in Cluj-Napoca alone. This year the situation will be more balanced with 43,000 sqm expected to be delivered in Cluj-Napoca, 35,000 sqm in Iasi and 17,000 sqm in Timisoara. Brasov will see no deliveries in 2015 but new office deliveries are expected to its modern office stock is projected to double by the end of 2015, meaning the grow to 90,000 sqm by the end of the office market outside Bucharest is pro- next year. The largest project due to jected to surpass last year’s record lev- come onto the market in 2016 in the Transylvanian city is the second phase els. New demand, which represented of Coresi Business Park (10,000 sqm). about 43 percent of last year’s 55,000 Going further into 2016, approximately sqm total take-up and which is ex- 80,000 sqm of office space is in the pected to maintain a similar share in pipeline in the main regional cities, and 2015, is and will continue to be the mar- by the end of next year, the total stock ket’s main driver, according to Mihaela might exceed 665,000 sqm, according Galatanu, head of research at DTZ Echi- to DTZ Echinox data. nox. IT and telecom players remain the simona.bazavan@business-review.ro

“I’m very glad to see that there are increasingly more investors who although might not enter the local market for the next six months or the next year, are considering Romania for the ﬁrst time in about seven years. Because there is money and everyone feels their pressure. Bank deposits or bonds don’t offer and attractive return. On the other hand, real estate offers a relatively safe alternative and Romania is becoming increasingly interesting” Silviana Badea, head of capital markets at JLL work on this. Until contracts are truly medium- and long-term it will be hard for yields to drop enough to attract large investors,” warned Tudos. But even despite such setbacks, Romania could see the entry of new players with an appetite for risk, said Badea. In turn, they will be followed by more risk-averse players, as was the case before the crisis, she argued.

And going outside Bucharest… Outside the capital, the oﬃce market

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15 COVER STORY

More growth and consolidation ahead for industrial market After demand for industrial and logistics space rose by 15 percent in the first half of the year, market representatives are confident that last year’s level of leasing activity will be maintained, if not even increased, by yearend. tenants, according to Mirela Radulescu, sales & marketing director at ICCO. But there are exceptions, such as Immoﬁnanz, which will this year start the speculative development of the ﬁrst phase of a 140,000 sqm logistics park near Bucharest in Mogosoaia. Other developments scheduled for this year include the extension of VGP Park Timisoara and Olympian Park Timisoara in western Romania by the end of the year, according to CBRE data.

Consolidation is the name of the game

Until the end of 2016 some 100,000 sqm of new industrial and logistics space will be delivered locally

∫ SIMONA BAZAVAN Demand for industrial and logistics space was up by 15 percent in the ﬁrst half of the year and the trend is expected to continue through to yearend, according to Cristina Pop, head of the industrial agency at JLL Romania. “By the end of 2015, we expect both the logistics and industrial/production markets to grow, both in terms of take-up and investment volumes. After a record 2014, when the total take-up was approximately 310,000 sqm, we expect 2015 to witness a similar level,” she told BR. Demand for both logistics and industrial space is going up, and what is more important is that it is spread across the country and there are multiple transactions both in Bucharest and in cities such as Ploiesti, Timisora, Oradea and Brasov, Dana Bordei, head of the industrial agency at CBRE Romania, told BR. Both logistics players and manufacturers are driving the advance, say market representatives. More and more retailers are looking to open logistics hubs outside Bucharest, especially in the western part of the country. Online retailers are also contributing to this. Demand for industrial space outside the capital is also on a positive trend and the availability of local workers at attractive costs is the main factor manufacturers consider before opening

production facilities in Romania. The industrial sector has had an even more dynamic evolution than logistics, Costin Banica, associate director of the industrial agency at Colliers International Romania, told BR. “What is important when we look at the production spaces leased over the past six months is the vote of trust large manufacturers have given Romania. More and more companies are choosing to expand their business in Romania and we’re even seeing new names prospecting the market. They are attracted here by the high quality of local products and services available, a qualified workforce at competitive prices and a stable economic environment,” he said. However, a growing problem is that companies are finding it increasingly hard to find qualified employees, and in order for the market to maintain its growth momentum, it is important on the long-run for the country to invest in the educational system, urge market representatives.

Who’s building? To cater to this growing demand, developers are investing in new projects. “We expect the stock to increase in the next 12 months, due to a combination of factors, including the increasing new demand, tenants’ expansion plans and the very low vacancy rates in quality projects. There are already a number of developers, such as Immoﬁnanz, who saw the opportunity and have al-

ready started construction works, with a clear objective of delivery – either by the end of the year or the ﬁrst quarter of 2016,” said Pop. According to data from Colliers International Romania, until the end of 2016 some 100,000 sqm of new industrial and logistics space will be delivered locally. “We predict that by the end of this year the stock of modern industrial space in secondary cities across the country will be up by about 5 percent compared to level reported at the end 2014,” said Banica. However, the overall growing demand for both logistics and industrial space has not proved enough for developers to change their cautious approach to speculative projects. “The industrial sector was the hardest hit by the crisis. While a few years back the vacancy rate went as high as 35 percent, now, in Bucharest, it is hard to ﬁnd a consolidated space of 10,000 sqm. However, after developers built speculative projects in 2007 and 2008 and then went through periods with vacancy rates of around 30 percent, they are less willing to risk and are instead opting for the built-to-suit model,” outlined Silviana Badea, head of capital markets at JLL, during BR’s 14th Realty event, in June. One such example is the Brasov Industrial Park developed by ICCO, which over the coming months will expand the project by 15,000 sqm, space that has already been pre-leased by existing

After Czech PointPark Properties (P3) bought the Europolis Logistic Park in Bucharest last year, the local market for industrial and logistics space is expected to see further consolidation by yearend, said Badea at the Realty event. “Industrial spaces are an attractive field for those who know how to manage this business, because one needs certain skills to do so. I think that over the next period we will see the consolidation of the existing stock in the hands of several large investors such as P3, CTP or Immofinanz. NEPI and Globalworth, the two largest real estate players of the past five years, have also invested in industrial assets. What we will see over the next six month is that the existing stock will be divided between these players,” she predicted. What will follow will be the expansion of existing projects, many of which have land available for this as well as new projects being kick started, pundits say. simona.bazavan@business-review.ro

Industrial and logistics market: Total stock (Romania): 1.9 mln sqm Total stock (Bucharest): 1 mln sqm Bucharest vacancy: 6-7 percent Vacancy at country level: 12.5 percent Prime rents: EUR 3.4-EUR 4/sqm/month Source: JLL, Q1 data

www.business-review.eu Business Review | July 2015

16 SPECIAL PROJECT

EXCELLENCE IN CBRE industrial department: in the service of its customers Dana Bordei, head of the industrial agency at CBRE Romania, tells Business Review about the main achievements of the agency’s industrial department and outlines its plan for the future How has CBRE Romania’s industrial department developed in the past few years? CBRE’s industrial department has always been one of the strongest in the field, reflected in the number and quality of the team members. At the moment the team is composed of seven members, out of whom five are consultants, one is dedicated to business intelligence and one is a support member. There are certain aspects that have always differentiated us in the way we do business. First, even during the downturn, the industrial team was strong and ahead of the market recovery, as we invested in training junior consultants and research experts. Second, we have opened a business office in Timisoara in order to better serve our clients in western Romania. Last but not least is the priority given to market intelligence and know-how. These efforts translated into a market share of over 50 percent in the last three years. Overall, the team has combined experience of over 40 years, working solely in the industrial, logistics and production sector, unrivalled by any other competitor. What are the main projects your industrial department has been involved in so far? Over the course of the last two years, the industrial team has signed a series of deals that are firsts for the market or highly significant in their size and complexity. For example, CBRE was involved in the largest renewal and renegotiation transaction ever completed in Romania – Carrefour, 45,000 sqm – then assisted the same occupier with its lease agreement in Deva for 21,000 sqm. Besides the logistics segment, the team has been involved in highly complex deals for major production companies, mostly within the automotive

market spread within the country, CBRE Romania is the only real estate agency that has measured and mapped all industrial properties in the country, class A and B, developer led or owner occupied. To provide a best in class service we need to have an in depth understanding of the production facilities and logistics hubs functioning all over Romania. These data help our clients understand the regional market context in terms of competition, labor force, business environment, logistics routes and country characteristics – vital details in the location decision matrix.

sector. For example, following CBRE’s advice, Lear opened a factory in Iasi, of 12,000 sqm, Yazaki opened one in Braila, of 16,000 sqm, Eni Snamprogetti will open a production facility of 13,000 sqm in Ploiesti West Park, and Federal Mogul will open a production unit of 13,000 sqm in Ploiesti (WDP Aricesti). These deals, alongside other small and medium-size transactions, helped create over 9,000 new jobs. Recently CBRE won the Industrial Agency of the Year Award. What lies behind this success? CBRE Romania has been awarded the SEE Award for Best Industrial Agency of the Year by EuropaProperty in 2013, 2014 and 2015. It is a major achievement and we are very proud of this accolade. We believe that certain factors convinced the jury to name us “the best” in our ﬁeld, namely: the biggest team in the market, the greatest combined experience of senior experts in all sub-segments of the industrial sector, for all geographical regions of Ro-

mania, in conjunction with the CBRE CEE team, formed of over 50 specialists with vast knowledge of the market underpinnings. We offer consultancy in its most complex and complete form – complete information about each location, analysis of the logistical connections, infrastructure analysis and potential, identifying suitable developers or occupiers for each project, negotiating lease terms, offering connections to other service providers and capital markets services. The team has the necessary experience to provide the most relevant market viewpoints regarding the logistics market, the best solutions for built-to-suit projects for the automotive industry and to establish the right stages for a new development, not just in the traditional towns for this type of activity, but in all Romania’s regions. What are the CBRE industrial department’s main achievements in the past few years? Aside from our major transactions and

How do you intend to develop your industrial department in the future? We plan to better serve our clients in the center of Romania by opening a business service oﬃce in this region and to have specialists with detailed knowledge and transactional activity for all the country’s regions. In addition, we will offer complete services and solutions for relocation or opening up a production/logistics unit by including technical consultancy services, project management and building surveys for our interested clients. The Romanian industrial real estate market is less transparent and easy to picture than other market niches. CBRE will continuously improve data collection and the relevance of market indicators, which will improve the general perception of the country’s business environment, attracting more and more investors. How important is your team to the success of your industrial department? The knowledge, professionalism and values of CBRE, the number one real estate consultancy company in the world, are disseminated in the local market via our professionals. The value of CBRE is given by its employees and they are vital in the performance of the company.

www.business-review.eu Business Review | July 2015

SPECIAL PROJECT 17

BUSINESS WHO’S WHO IN CBRE’S LOCAL INDUSTRIAL DEPARTAMENT Marian Orzu, head of industrial business development Background Marian Orzu joined CBRE in 2005 as a junior broker in the industrial department. He was promoted to senior broker, head of the industrial department and head of industrial business development. During this period he has become an important figure on the industrial market, making a great contribution to the forming and development of the Romanian logistics market. With over 10 years of experience on the market, Orzu has been significantly involved in some of the biggest industrial market transactions, totalling a surface of approximately 180,000 sqm. Professional Experience Orzu can assist tenants in their business development strategy by offering complete representation services, from finding the best location to project delivery stage: lease versus buy analysis, current situation & business plan analysis, built-to-suit transaction services, surplus space and/or utilization analysis, supply chain logistics efficiency studies, land acquisitions/assemblage, comprehensive property availability studies, labour and freight costs – comparative studies, developing detailed occupancy strategies, sale/lease of existing facilities, sale/leaseback transactions. Prior Assignments: Nokia factory sale to De Longhi, 35,000 sqm, Lear Corporation, built-to-suit project, 12,000 sqm, Snamprogetti, production facility, 13,000 sqm, NDL Beverage, lease, 5,400 sqm. Daniel Cateliu, broker Background Daniel Cateliu is a broker within the industrial department at CBRE Romania. He specializes in new leases and renewal processes for local as well as international clients in warehouses and logistics locations in the Greater Bucharest area. Professional Experience With previous experience in insurance brokerage, Cateliu offers his clients proactive solutions for spotting the best location and warehouse premises according to their business specifications and requirements. With a growing desire to go the extra mile, he has proved to be a valuable member of the industrial team by providing excellent services to owners/investors and future tenants: current situation and business plan strategy, stay versus go analysis, potential properties relocation report, detailed reports on selected shortlisted properties, negotiations with respective warehouse owners. Prior Assignments: Romcarton, new lease, 3,000 sqm, Gideon Richter, new lease, 1,400 sqm, Tibbett Logistics, lease, 1,000 sqm. Delia Mihail, CRM coordinator Background With four years of experience in audiovisual media, Delia Mihail joined CBRE in 2008 and has gained experience in support coordinating activities for the office and industrial & logistics agencies. She was later promoted to CRM coordinator, and now provides professional support to the industrial & logistics and capital markets agencies. Professional Experience With a desire to go the extra mile, ambition, proactivity and a customeroriented approach, Mihail has proved to be a valuable member of the team with a continuous focus on self improvement: client relationship manager, industrial & logistics database, development of specific CRM levels.

Mihai Escu, consultant Background Mihai Escu is a consultant within the industrial department at CBRE Romania. He offers real estate consultancy to local occupiers in areas outside Greater Bucharest. Professional Experience With over four years of experience, Escu has assisted tenants in their search for the best premises according to highly speciﬁc requirements and details of large relocation projects. He works with the technical teams of the tenants and project managers to ensure relocation projects are delivered under the set and scheduled timeline: analysis of the current situation, extended property search, reports on industrial segment availability, negotiations with current and future landlords. Prior Assignments: Proﬁ, 5,000 sqm, Medical Vision, 1,100 sqm, OTZ, 1,500 sqm, Eni, 2,000 sqm. Tudor Muntean, researcher Background Tudor Muntean is a researcher in the industrial department at CBRE Romania. He specializes in real estate market studies and reports for the Greater Bucharest area as well as for regional cities in Romania. Professional Experience Muntean has extensive and valuable experience in research services for the industrial and logistics segments. He now provides up-todate market overviews, analysis and detailed examinations of selected aspects of the real estate market to industrial occupiers, owners and investors: regular, quarterly publications, custom-made presentations and reports, forecast of real estate fundamentals, certain industry branch development in selected parts of Romania, demographic data at regional level, existing and planned infrastructure information, location detailed analysis, labour force data. Prior Assignments: Industrial big box market view, industrial destinations in regional cities, special reports. Madalin Aresmeritoaie, senior consultant Background Madalin Aresmeritoaie is senior consultant within the industrial department at CBRE Romania. He specializes in leases, renegotiations, renewals, disposals and built-to-suit projects for local and multinational clients in important industrial and logistic parks in western Romania. Professional Experience With over 14 years of experience on the real estate market, Aresmeritoaie has grown to become a valuable and resourceful consultant, both on tenants’ behalf as well as on the landlords’ or investors’ side. He constantly offers innovative options and creative opportunities for developers and investors ready to commit to long-term built-to-suit projects, from identifying the right plot of land to ready-delivered project: analysis of business requirements, land acquisitions/assemblage, built-to-suit transaction services, municipal, state and tax-incentive negotiations, comparative studies and reports, performing detailed market and property analysis, comprehensive property availability studies. Prior Assignments: Plexus, 25,000 sqm, TT Electronics, 36,000 sqm, Boa Group, 10,000 sqm, Borgstena, 6,000 sqm, Dedeman, sale transaction of 5 ha in Targu Mures, Lidl, sale transaction of 5,000 sqm in Timisoara.

www.business-review.eu Business Review | July, 2015

18 COVER STORY

Growing retail sales spur developers to resume investments After retail sales went up by 4.3 percent in the first five months of this year, shopping center owners and retailers are confident that the trend will continue or even pick up pace by yearend. As a result, investments in new retail schemes and the opening of new stores are also back on the table. there is a constant need to innovate. Shopping malls themselves need to be increasingly community oriented,” commented Anca Damour, director at Carrefour Property Romania, during BR’s 14th Realty event this June. And being relevant is the new name of the game. “It is about creating civic centers rather than just outlets with retailers inside,” said Georgios Argentopoulos, CEO of Baneasa Developments, at the same event.

Changing consumer patterns

Changing consumer patterns: local shoppers are becoming more mature

∫ SIMONA BAZAVAN Retail sales went up by about 7 percent last year and results from the first semester confirm an overall growing trend, say market representatives. “Most fashion retailers reported sales increases of around 10-15 percent, some even of 20 percent, in the first semester, which have boosted their confidence as well,” Liana Dumitru, associate director of the retail agency at Colliers International Romania, told BR. While most of this increase was the result of retailers restructuring their local networks over the past years by relocating underperforming stores to better locations, spending on non-food products is going up overall, she added. “We’re seeing a slight decrease in the share of revenues allocated to food products in favor of clothing or durable goods in general, and this will continue to reflect positively in these retailers’ budgets,” she commented. Improved consumer confidence means retailers too are stepping up expansion plans. “The sustained economic growth, strong increase in consumption and one of the highest levels of consumer confidence in the

last few years are likely to push retailers to reconsider their so far cautious expansion plans in Romania. Existing shopping centers with proven good performances are still the main destination of new entrants, due to the relatively limited options in terms of new supply,” Adelina Oprita, retail consultant at JLL, told BR. But that, too, is starting to change after the new retail stock delivered in 2014 fell to a ten-year low. The beginning of the year saw the opening of two large shopping malls, NEPI’s Mega Mall in Bucharest and Immochan’s Coresi Shopping Resort in Brasov, each with a GLA of about 70,000 sqm. Other developments include the extension of retail schemes such as City Park Constanta, Severin Shopping City and Deva Shopping City, all scheduled to be completed by the end of 2015, according to JLL data. All this means that major retailers now have new options to expand available to them, added Oprita. “Retailers’ interest in expansion remains high, both in Bucharest and outside the capital in large cities such as Brasov, Timisoara and Constanta, where the performance of existing stores is good and most retailers are planning new openings,” said Dumitru.

Also, retailers that are already present in regional cities and that are targeting middle-income consumers are continuing their expansion in smaller towns, especially as part of developments such as retail parks, she added. When it comes to expansion, grocery retailers such as Mega Image remain the most active, but fashion retailers too are expanding their networks. H&M has already opened three new units in 2015 and has recently announced that its sales in the first fiscal semester of this year were up by half. Spanish Inditex opened ten new shops in 2015 in Coresi Shopping Resort Brasov and Mega Mall Bucharest after a one-year pause, according to Oprita. Back in Bucharest, the opening of a new retail project the size of Mega Mall does not significantly impact the city’s retail scene, say market representatives. However, while there is room for more malls, shoppers’ demands are changing and forcing developers to innovate. “Bucharest is a big city with a big catchment area. As time spent in traffic is becoming an increasingly important factor when choosing a shopping mall, and whether we shop online or not, we will see more dominant neighborhood shopping centers developed. However,

The need to innovate has mostly to do with local shoppers themselves becoming more mature. “The first half of the year marked a clear shift towards maturity. People are spending more wisely. They are looking at value for money instead of expensive brands. They are really focused on getting what they need, which is probably the result of years of crisis,” commented Argentopoulos. Damour also pointed out that customers are becoming increasingly demanding. “This is happening because they know what it is they need and they want certain comfort and services when they go shopping. They are also mindful of the time they need to arrive at a shopping center and easy interior access,” she said. Nevertheless, price remains the main attraction point. “Prices are key and they remain a driver, but what matters is what you offer besides the price,” added Damour. Another trend that is starting to influence the local retail scene is the growing share of online sales. For example, electronics retailers, who make most of their sales online, had the best start this year, reporting an increase of 15 percent so far. Fashion retailers too are expanding into online, as was the case with H&M this March. “The biggest difference that we have seen so far is the increase of online sales or a combination between online and offline. Segmentation based on gender or age group alone doesn’t make much difference. Online research and online sales are something that we’re seeing more and more. And this is influencing both the way we do business and the way retailers do business. We need to adjust to this as this is something that will keep evolving,” concluded Argentopoulos. simona.bazavan@business-review.ro

www.business-review.eu Business Review | July, 2015

20 COVER STORY

Number of new apartments to go up by yearend After posting the first signs of growth in 2014, the local residential market has maintained this trend in the first semester of 2015. Market representatives are expecting stable development through to yearend, too. One welcome change, however, is that the market is becoming increasingly mature, raising hopes of a sustainable growth cycle ahead.e.

Some 10,000 new housing units will be delivered in Bucharest and its surrounding areas by the end of 2015

∫ SIMONA BAZAVAN Conﬁdent in the ﬁrst signs of growth posted last year, developers are expected to push the pedal on residential developments this year. Some 10,000 new housing units will be delivered in Bucharest and its surrounding areas by the end of 2015, beyond last year’s level, said Viorel Mohorea, project manager, new homes division, at Coldwell Banker, during BR’s 14th Realty event, held last month. And who else is building? “On one hand there are those developers that have been active since before the crisis. New entrants are generally small local players, many of whom have already completed and sold successful projects and who are building larger projects. Some of them have been present so far

1.8% The drop in average asking prices posted during the first semester (Imobilare.ro data)

only in southern Bucharest and are followed by another crisis,” said Laszlo now upgrading to better areas of the Csiki, CEO of Adama Group, a member city. So what we’re seeing is that there of Immofinanz Group, during the Reare few foreign newcomers while local alty event. ones are increasingly active,” commented Adrian Erimescu, co-founder Clients are getting demandand CEO of Imobiliare.ro. There are ing even office developers now expanding “Buyers are more educated and asking their business into residential, accord- more questions than they did in 2008, ing to media reports. for example. They pay great attention As for how the market will look at to the neighborhood’s development the end of 2015, most pundits forecast potential because they see the acquisia stable evolution through to yearend, tion as a long-term investment and with the possibility of small price in- they often bring along consultants to creases for new apartments. Sales tar- advise them on the quality of the congets are on the up given results from struction. This didn’t happen very the first five months of this year. often before,” said Mohorea. For example, sales in the CosmopoImobiliare.ro visitors are also more lis residential project in Bucharest have demanding in terms of the details probeen rising for the past three years; vided by the real estate platform, achowever, this year growth stood at cording to Erimescu. “They are paying around 30 percent. “While last year we more attention to the available inforsold on average some 27 units each mation – information about the neighmonth, this year we’ve sold on average borhood, access to public 40. The developer will also deliver infrastructure, schools and so on. This some 400 new apartments which it is a clear change from a few years back wants to sell by yearend,” said Mohorea, when they needed far less information. whose agency is the developer’s exclu- Now they are very focused on the qualsive representative. ity of the information requested. Their And the word of the day remains research also takes longer,” he added. stability. “We hope to see a normal Another aspect is that buyers are no growth cycle that will last for more longer willing to make off-plan acquisiyears. What we don’t want is another tions, except from well-established boom period that after two years will be local developers, according to Andreea

Comsa, managing director of Premier Estate Management. All in all, most transactions today are closed by the intended owners, whereas back in 2008 many of the acquisitions were made by large, speculative investors who were looking to make a profit in six to eight months, added Mohorea. This doesn’t mean, however, that investment buyers are no longer present on the market. “There continue to be investors interested in apartment acquisitions given that property yields surpass interest rates on bank deposits. So there are still investors looking to buy apartments – probably not as many as in 2008 but they are nevertheless active. Also, because prices have stabilized, many buyers that have the necessary funds to make an acquisition, but have postponed it for years waiting for prices to go down even further, have started to buy,” said Comsa. And developers need to adapt to buyers’ needs and preferences – present as well as future ones. “We need to be able to anticipate. Given that we are building a product today that will be available on the market in one, two years, we need to be able to anticipate how demand will look by then,” said Csiki. The company is currently developing a EUR 3 million project in the Berceni neighborhood of Bucharest. As for buyers’ financing options, the government-backed Prima Casa scheme continues to be the market’s main driver. “Prima Casa remains the leading financial option for Adama’s clients; however, low interest rates mean that they are also opting for regular mortgages,” added Csiki. One positive development is the fact that more developers are offering their own financing programs. “This means that they have easier access to financing themselves,” pointed out Erimescu. Indeed, industry representatives believe that banks are more open to financing not only end buyers, but also developers. Although Adama is financing the EUR 3 million investment in the Berceni project from its owns funds, it says it has been approached by several small banks offering financing options. All this should confirm once more that the market has entered a more sustainable growth cycle, say pundits. simona.bazavan@business-review.ro

www.business-review.eu Business Review | July, 2015

ENTREpRENEuR 21

Smart move: pioneering experience packages on the local market Alexandra Ionita of Smart Experience has turned a new idea for the Romanian market into a business that has notched up five years of operational activity. She tells BR about overcoming client skepticism about the type of service her firm offers and its nationwide expansion strategy. ∫ ANdA SEBESI Alecsandra Ionita, wellbeing specialist at Smart Experience, chose a quote by English educationalist and writer Sir Ken Robinson, as her company's motto: “Imagination is the source of every form of human achievement.” In 2010 she founded Smart Experience, a company that provides experiences like climbing, off-road trips, themed parties, paragliding and flights, wellbeing programs and creative workshops for both individual and corporate clients. “In the current economic climate, companies are choosing to differentiate more and more through the perks they offer their employees rather than through financial benefits. These include wellbeing programs, activities, a different work environment, an avant-garde or unconventional office design and fitness subscriptions,” Ionita tells BR. She adds, “Companies have learned that their employees are the best brand ambassadors they can have. We wanted to persuade them to invest in customized programs for their employees to develop their skills, passions or just relax them and boost their creativity.” Since 2010, her team has tripled and its volume of work has increased steadily. “So we needed to develop rapidly. Because of the increasing demand from our corporate clients we decided to open new branches in three key Romanian cities: Cluj-Napoca, Timisoara and Iasi,” she says. The most difficult moment her busi-

Smart Experience Established: 2010 2014 turnover: about EUR 150,000 2015 turnover: about EUR 150,000 Number of employees: three, and four full-time collaborators Initial investment: EUR 15,000 Total estimated investment: EUR 40,000-50,000

ness has faced so far, according to Ionita, was when she started it, as it was very tough to make people believe in these kinds of gifts and services. “Our on-return moment was when we gained our ﬁrst large customer who believed in us and bought several hundred gift packages for his partners for Christmas. It was hard then because we didn’t have the expertise and we faced a lot of challenges. But our experience in organizing events and working with professionals from large companies helped us to surmount them. In addition, the feedback was good and that gave us the courage to continue,” says the entrepreneur.

alcohol instead of a memorable gift.” But Ionita says there is also positive news: “The good thing is that fewer people now think like this, which is proven by the increasing number of individuals that contact us to offer unique and memorable gifts. In order to know exactly what they offer, we organize different events where they can test specific sensations,” adds Ionita. Turning to the wellbeing business line, the entrepreneur says that the main challenge is that some companies think they can organize such programs in-house, without the external help of a specialized company. “They often find that those who deliver the programs don’t meet their expectations. They can be excellent professionals but often lack experience in working with companies’ ‘students’,” says Ionita. In her opinion, this gap between expectations and implementation lessens the quality of the wellbeing program and creates the wrong perception that the whole program achieves little. “Our experience over the past few years in delivering such workshops shows that wellbeing programs significantly boost employees’ non-financial motivation and their transformation into ambassadors of the employer’s brand.” As for the competition in the field, Ionita says that there are not many players. “In the last three-four years few companies that offer similar services have appeared on the market. Because the market we operate on is a special and niche one, with very small margins, some of these companies had to adjust their activity or even close,” says Ionita. “At present there are only two or three firms that offer activity packages and a few others on the wellbeing segment.” The founder of Smart Experience says that what differentiates her firm from the rest is a wide portfolio of services and its experience in this field. “Being a niche and emerging sector, there is no market research to show its value and market share,” notes Ionita. She adds that she intends to develop the portfolio of activities nationwide and to diversify the current wellbeing programs that the company offers.

If she started another business she says she would plan better and try to learn from others’ experience in the ﬁeld. “Unfortunately you can’t have your time again so I don’t often think about what I would have changed. Instead I prefer to learn from the past in order to apply it now or in the future,” she says. As for the challenges her business faces, Ionita says that they come from two different directions: packages of activities and the wellbeing area. “People are not yet open enough to offer or get something intangible. There are still many who prefer clothes or a bottle of anda.sebesi@business-review.ro

www.business-review.eu Business Review | July 2015

22 TAX & LAW

BRIEFS President rejects Fiscal Code as unsustainable President Klaus Iohannis has rejected the new Fiscal Code and sent it back to Parliament to be reanalyzed, arguing that its implications on the budget are not clear. “We support easing and simplifying the fiscal system by reducing certain taxes while ensuring fiscal consolidation and predictability. From this perspective, we believe that the new tax code may be implemented only after a rigorous and thorough analysis of the implications of the whole set of fiscal and budgetary measures used to build the general consolidated budget, both for 2016 and in future years, and only in compliance with the obligations assumed by Romania and the domestic laws concerning financial and budgetary discipline,” said the president. In a later statement, presidential adviser Cosmin Marinescu said the new Fiscal Code would have major implications on next year’s budget, which will be made worse by the fact that the government has not presented a plan to reduce public expenses as well. Moreover, the new Fiscal Code did not get the approval of the European Commission or the International Monetary Fund, he added. The new Fiscal Code and Fiscal Procedure Code had previously passed the Chamber of Deputies with 309 votes for, two votes against and one abstention, winning the political support of both the ruling coalition and the opposition. The main change it brings is the reduction of the general VAT level from 24 percent at present to 19 percent starting January 1, 2016. Other changes include cutting VAT on food products to 9 percent, the elimination of both the EUR 0.07 excise tax on fuel and the tax on special constructions, and an increase in local taxes. PM Victor Ponta criticized the president’s decision to reject the Fiscal Code, saying that it sent the wrong message to the local business community and in particular to potential new foreign investors. He added that despite the president sending the Fiscal Code back to Parliament, the government was considering implementing some of the measures through the procedure of assuming responsibility in Parliament or via emergency ordinances. Representatives of the main opposition party, the National Liberal Party (PNL), have criticized this plan as unconstitutional and have instead called for Parliament to meet in an extraordinary session in August to debate the code.

The new criteria for the fiscal evaluation of the independent activities performed by self-employed individuals in serving more than one client etc. Therefore, we may conclude upon scrutinizing these rating standards from the legal standpoint, that in theory most of the authorized individuals (mainly liberal professions) could easily meet the criteria, so long as they refer to the general freedom to organize the activity, whereas in practice some of the criteria may be challenging for the individuals (for lack of several clients, for instance), notwithstanding the basic statutory freedom to self-organize an independent profession.

Luisiana Dobrinescu, Tax Partner, Dobrinescu Dobrev SCA

Law no. 187/2015 for amending the Fiscal Code, recently published in the 07 Jun 2015 Official Journal no. 499 rephrases the rating standards based on which a certain activity may be treated as either independent or dependent. The legislator set up seven criteria, sufficiently unclear as to cause further discomfort to many taxpayers. An activity carried out by an individual is rated as independent if at least four of the following criteria are met: l free choice to render the activity, to set up the work schedule and the work place; l free choice to carry out activities for several clients; l taking by the individual of the inherent risks of the business; l making use of the individual's own working capital; l contribution of the individual with his own intellectual or physical work, as the case may be; l the individual being part of a professional body/order having by law statutory and regulatory role for the profession; l the individual having free choice to carry out activities directly with employed personnel or by contracting third parties. It can be easily observed that the text refers to the freedom itself of the individual in performing a self-employed activity, in scheduling his tasks,

However in fiscal matters the principle of economic preeminence is supposed to prevail over the legal form. For example, concerning the seventh criteria referring to the free choice to carry out activities, directly with employed personnel, or by contracting third parties, one may wonder if a professional who chooses to hire no extra staff (a tax consultant, for instance) implicity waivers the freedom to self-organize his activity and thus fails to meet the criteria. Another example is related to the third criteria: the inherent risks are assumed by the individual carrying out the activity. What are these inherent risks? The only one we can think of is that of the risk to have the contract terminated, in case of failure to carry out adequately the services. Can there be other risks? How can one prove that the individual assumes such risk, other than by stipulating as such in the contract (rather unnecessarily, from the legal standpoint)? In other words, is it enough to simply change the wording of the service supply contracts by clearly stipulating these freedoms, in order to avoid the fiscal reclassification? In our opinion, without having further guidance in the interpretation of new text of the Fiscal Code (through methodological norms or by means of other secondary legislation), it is quite difficult to eliminate the risks of a fiscal reclassification. Significant implementation problems may occur when a self-employed individual is himself aware that such standards of independence are not met in his case, or he simply cannot or would not assume the risk of an adverse interpretation: his own remuner-

ation would become subject to income tax and social contributions as salary pay and his business would be liable to withheld and pay to the state budget the above mentioned taxes, while he would be utterly unable to reorganize and unregister itself as an independent professional. One and the same activity would thus risk a double taxation, both as incorporated business (employer) and as authorized individual. The undesired conclusion is that, at this moment, neither the individuals nor the legal entities - beneficiaries of the services provided by the individual – cannot, by themselves, be fiscally reclassified, at the same time maintaining the status of authorized individual. Such conclusion faces the individuals running a risk of fiscal reclassification with making a decision to incorporate and hire themselves under an individual labour contract under a completely different civil and fiscal environment. One always must keep in mind that certain professions (lawyers for instance), reject the existence of an individual labour contract, which is incompatible with the statutory regulations of independence. Also, certain liberal professions (lawyers again) have their own social insurance system, which is not supervised by ANAF. The legal profession would never be made liable to pay employer contribution to the state-run pension fund. In our opinion, the new law largely misses its target for lack of instruments to have it properly implemented on a practical level in a multitude of cases. To conclude, an independent professional faces now two basic options: l to take the risk of later fiscal reclassification for unmet independence criteria, since more often than not, they are either incompatible or impracticable with regard to the independent professional regulations or l to renounce, whenever possible, to the independent professional status, and incorporate the business and hire himself under a labour contract in order to be able to voluntarily collect and pay the salary taxes and contributions.

luisiana@dobrinescudobrev.ro

www.business-review.eu Business Review | July 2015

TAX & LAW 23

Do the recent fines signal the end of promotional campaigns in food retail in Romania? ultimate goal of the competition law which is the protection of competition, as a process, and not competitors.

Catalin Suliman, Partner, Schoenherr si Asociatii SCA

At the beginning of 2015, the Romanian Competition Council has announced the results of the food retail investigation amounting to sanctions applied for vertical agreements concluded between retailers and their suppliers. In the view of the authority, these agreements included resale price maintenance and certain exclusivities within regards to specific promotional campaigns. To sum up, the decision of the Romanian Competition Council revolved around two major principles: l A party could not impose conditions or restrictions on a reseller that became the owner of the goods. l In an agreement between a supplier and a retailer the parties cannot agree on conditions related to the contracts signed by the supplier with other parties (competitors of the retailer). The Competition Council focused on the case when an undertaking intends to secure a best price mechanism considering that this may end up being, even on the short term, a minimum price. Following the sanctions, two main questions have been raised in the food sector: l Does the decision of the Romanian Competition Council mark the end of promotional campaigns? l Is there a legal obligation for a supplier to use only general promotional campaigns? The analysis should start from the

With regards to promotional activities, these are and remain beneficial to the end consumers and the competition authority did not aim at prohibiting them. One sensitive competition aspect related to the promotional campaigns remains the references to the resale price. The competition rules allow the supplier to recommend a certain price level, or even to impose, in justified cases, a maximum price, with such resulting (directly or indirectly) into a fixed or minimum price. In all cases, the reseller should be free to grant any additional discounts or reductions according to its commercial policy without any interference from the supplier. It is worth mentioning that promotional campaigns could come from the supplier or from the retailer. In all cases when a promotional campaign is analysed from a competition perspective one may also consider the possibility for other retailers (than the beneficiary of the campaign) to react to a price reduction on the market by decreasing their profit margin. Regarding the existence of a legal obligation for suppliers to grant only general promotions (simultaneously in resale channels), we believe that a distinction should be made between a dominant supplier and a non-dominant supplier. A non-dominant supplier cannot be forced to grant general promotions considering that the supplier should be free to aggressively compete (including through price promotions) with other players on the market and to grow on such relevant market. The only conditions that the supplier should observe would be (i) to decide independently the promotional activities and not based on a pre-existing agreement with the retailer, and (ii) to avoid the restriction of any competition on the market (for example, by granting a price reduction that would lead to a resale price below the acquisition price of other retailers, which do not benefit from the promotion, thus, making it impossible to compete with the beneficiary of the promotion). Thus, a supplier may independently decide to grant a promotion for a certain product and for a determined period of

time only on some channels / regions with the aim to boost the sales on that channel / region. Such unilateral action will result in a positive competitive reaction considering that it should "force" other players on the market to react to the promotion and to reduce prices as well. The rotation by the supplier of promotional activities between retailers has a pro-competitive effect as it triggers follow-on promotions (such action pressuring the other retailers to decrease their margin in order to compete with the initial promotional activity).

BRIEFS PM conditions public sector wage law on Fiscal Code Prime Minister Victor Ponta has said that he wants to see the new Fiscal Code adopted so that the government will have all the necessary data to complete the law regulating public sector salaries. “I hope the Fiscal Code will be passed so that we will have predictability this autumn. With the Fiscal Code in place and the economic data we can ﬁnalize the public sector wage law this autumn and take it to Parliament,” said the PM, according to Mediafax. He added that he wanted to clarify this aspect before the government broke for the summer holiday on August 1.

ANAF increases tax take by 8.8 pct in Q1

The National Agency for Fiscal Administration (ANAF) has announced that it has exceeded the projected tax collection for the first quarter (Q1) by RON 4.37 billion (EUR 980 million), collecting a In an ideal competitive market, the end consumer should benefit from dis- total of RON 96.06 billion (EUR 21.46 counts from all retailers, which would billion). Year on year, this brought the happen to a large extent with the rota- agency a surplus of RON 7.78 billion tion (succession) of promotion rather (EUR 1.74 billion), meaning an 8.8 perthan with a general campaign aimed by cent increase. Figures were positive for June too, a supplier at all its retailers at the same with ANAF announcing the projected time. tax take was up by RON 51.64 million, Thus, there is no legal obligation for converting to an increase of RON 643.38 a non-dominant supplier to grant gen- million year on year. The agency says that there have been eral promotional campaigns in the marpositive indicators in the fight against ket. tax evasion, with both VAT and tax on With dominant suppliers, the above profit collection seeing a significant inanalysis needs to take into account the crease. VAT collection reached RON fact that they have the capacity to influ- 29.18 billion in Q1, an 18.3 percent hike ence the resale market and may fore- year on year, while the tax on profit close it for some smaller retailers. collection rose by 12.2 percent year on However, even in case of dominant sup- year.

pliers there is no per se obligation to grant generalized promotions (on the other hand there is an obligation not to unjustifiably discriminate between partners). For tailored promotional campaigns, a case by case analysis is recommended in order to determine the objective justifications of such a promotion, its effects on the market, whether the practice contributes to technical or economic progress, while allowing consumers a fair share of the resulting benefits.

President approves holiday voucher law

President Klaus Iohannis has approved the law on holiday vouchers, which had been passed by the Chamber of Deputies with 303 votes for and 12 abstentions. The law allows all employees to beneﬁt from holiday vouchers worth up to six months of average pay. Employees in the private sector can beneﬁt either from vouchers or a vacation bonus, according to the negotiated terms. In the In conclusion, the recent actions of public sector, vouchers will be compulthe Romanian competition authority in sory, with no money or vacation the food sector have the goal to under- bonuses being awarded. This holiday voucher system will line the principles and fair practices related to promotional campaigns. The keep tax incentives for employers, as intervention of the authority does not the vouchers are deductible and exlead to the end of promotional activities empt from wage taxes. The program (in a sector dominated by such) nor does will remain under the control of the it represent a legal obligation imposed Ministry of Finance, and any institution to suppliers limiting their potential for that meets the required conditions can an aggressive approach in the market. enter the scheme. The measure is expected to help local tourism as the c.suliman@schoenherr.eu vouchers will not be redeemable outside Romania.

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La vie en rose: French investors more optimistic about local business prospects

From left to right: Alexandru Nastase, DPIIS; Dana Gruia Dufaut, Gruia Dufaut Law Oﬃce; Nicolas Maure, Groupe Renault Romania; Eric Faidy, Michelin Central&South Eastern Europe; Eric Stab. GDF Suez Energy Romania; Francois Saint Paul, Ambassador of France in Romania; Edouard Millot, Finexpert

Romania needs to invest more in infrastructure, be it roads, the education system or public administration reform, to increase its competitiveness, argued participants in the sixth annual French Investors Forum organized by Business Review. However, overall the outlook is a positive one, they agreed. ∫ SIMONA BAZAVAN The macroeconomic results posted by Romania last year and during the ﬁrst quarter of 2015 are making French investors more positive about their local business perspectives.

“I am very optimistic about Romania’s future and this feeling is shared by my colleagues as well. Winston Churchill said that a pessimist sees the diﬃculty in every opportunity while an optimist sees the opportunity in every diﬃculty. If we look today at Romania we see that there are numerous oppor-

tunities and the diﬃculties are there to be overcome,” said Eric Stab, president and CEO of GDF Suez Energy Romania. Eric Faidy, the VP-head of Michelin Central & Southern Europe and also president of the French Chamber of Commerce and Industry in Romania (CCIFER), shared a similarly optimistic

take. “Michelin has been present locally for over 12 years and we have also set up our regional headquarters here. I think that this is the best proof that on the long term Romania is a good place for Michelin,” he said. While the economic situation could be even better given the context, Roma-

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All photos: Mihai Constantineanu

Denis Alnitei, Orange

Eric Stab, GDF SUEZ Energy Romania

nia is on an obvious development trend and “in a few years things will improve even further, said Christophe Weller, owner of Corporate Office Solutions. Romania’s macroeconomic results in the first quarter are encouraging for new French investments as well, said Alexandru Nastase, secretary of state with the Department for Foreign Investments and Private Public Partnership. But not all is rosy. Talking about some of the challenges companies face when doing business in Romania, panelists argued that many still come from the lack of fiscal stability. “We need fiscal changes to be more stable. Everyone remembers the tax on special constructions which has affected many industries,” commented Dana Gruia Dufaut, partner at Gruia Dufaut Law Office. Another major obstacle remains Romania’s poor image abroad. “One of the main problems investors coming here face is exactly this image deficit Romania is struggling with. There is a considerable gap between people’s perception of Romania and the reality on the ground. Reality is more often better than the perception. We as investors have a duty to remedy this and the Romanian authorities too should address this and make sure that this gap is reduced,” said Stab.

ucation. Generally, when I think about “Our target is to remain competitive reform I think about modernizing the both from an operational and industrial administration. For me, the priority perspective. We want to ensure our fuwould be investing in administrative re- ture here and to come up with new form because this would ensure conti- projects. This is a very competitive industry. We always need to come up nuity,” outlined the ambassador. He added that building highways with new things, to redesign and innoand reforming the administration are vate,” said Nicolas Maure, general manlinked and that progress in this area is a ager of Dacia Renault Romania. He added that the carmaker’s success in matter of time. On the topic of how French in- Romania is “undeniable”, with the vestors perceive Romania’s recent company accounting for 3 percent of progress, the ambassador said that the the country’s GDP and 8 percent of its general view is a positive one. “Over the exports. past year since I came to Romania, I can This need to increase the local econtell you that I have been surprised by omy’s competitiveness was highlighted how much French investors are at- once more earlier this year when the tached to Romania. They believe in Ro- CCIFER launched its Competitiveness mania. This includes large companies White Book, a set of 52 proposals inas well as smaller ones. Over this past tended to help transform Romania year I have never met people from a from a low-cost economy to a competFrench firm that said they wanted to itive one. Talking about this initiative, leave Romania, none that complained Edouard Millot, partner at Finexpert about not being able to run their busi- and the event’s moderator, said the ness or that local partners were causing project tries to build a partnership bethem trouble. I have only met people tween the public and private sectors. “It that wanted to take advantage of the is an attempt to propose an administraopportunities they find here,” con- tive-fiscal background that would offer cluded the ambassador. support for innovation and professional training,” he added. “This is something that was put toThe competitiveness card Increasing competitiveness is a key re- gether by company managers, people quirement for ensuring further eco- who understand the opportunities and nomic growth, stressed participants. difficulties of doing business here. It This is firstly needed to maintain Ro- cannot change things overnight, but mania as an attractive destination for these 52 concrete proposals are meant to ensure our companies’ competitivenew investments. “GDF has been present in Romania ness,” said Faidy. One such measure for ten years and we have invested over would be changing the fiscal year for EUR 1 billion. We too have chosen Ro- farmers according to the calendar of mania to set up a regional headquarters agricultural activities. This would help because if we were to compare the farmers in their relations with banks for country to its neighbors, we see that it example, he noted. has a lot to offer. I know that there is competition between countries in at- The people problem tracting new investments and we need Competitiveness and recruiting the to make sure that Romania remains a right people for the job go hand in hand welcoming country,” commented Stab. and here French employers are beginMaintaining competitiveness is also ning to have a hard time on the local an objective for investors themselves. market, said participants. On one hand

Let’s talk infrastructure Infrastructure too remains a problem. Romania needs more investments in its road network to boost its economy, but investments in upgrading its public administration are just as necessary, said Francois Saint Paul, French Ambassador to Bucharest, during the event. “This country has huge potential, but with some conditions. This potential can be achieved only if some necessary steps are taken, meaning if the required infrastructure for growth is built. I am thinking of highways but also of investments in the healthcare system and ed-

Adela Jansen, BRD

Christophe Weller, Corporate Oﬃce Solutions

it is becoming increasingly challenging to ﬁnd the right people, as many skilled workers have left to work abroad and the local education system is not welltuned to the needs of the labor market. This is pushing employers to invest in training programs meant to remedy this deﬁciency. On the other hand, once the right people are found it is becoming harder to retain them. “Raising salaries is one way, but it is about much more than this. It is about offering them the right conditions to develop their talents in a pleasant environment,” said Weller. In their quest to increase productivity, companies have taken a different line when handling HR matters, said Adela Jansen, HR executive director at BRD. “The entire business approach has changed in the last few years. Looking towards the future, we should no longer take a low-cost approach; we must focus on value-added services, recognized by clients. Also, in our industry, clear steps have been made to embrace a qualitative and long-term perspective, rather than the quantitative one from the past,” she commented. Moreover, salaries will continue going up over the coming years and their growth rate will be above the Western European average, said Denis Alnitei, organizational development manager at Orange. “The real challenge is smoothing relations between companies and universities so that the number of specialists will continue going up,” he said. Another piece of good news and sign that the labor market is evolving past a low-cost model is that the salary is no longer the main focus for candidates. This is especially the case for young applicants who are increasingly more interested in the professional growth opportunities an employer offers. simona.bazavan@business-review.ro

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26 eNerGY

Homes and businesses endure gas price hike as market liberalization continues The price of gas for the public and producers increased on July 1, from RON 53.3/MWh to RON 60/MWh, and will continue to rise annually by RON 6 in 2016 and 2017, according to Mediafax. The issue is due to be discussed again in April 2018, but at the moment the calendar includes a similar annual estimated increase until 2021.

Price liberalization and new players entering the market could threaten the positions of traditional leaders

∫ Laura GriGore The new timetable for the liberalization of the purchase price of natural gas from domestic production for household customers and thermal energy producers – only for the natural gas used to produce heat in cogeneration plants and heating plants for consumption – was approved by the government for July 1, 2015 to June 30, 2021. “The liberalization timetable is the result of negotiations with the International Monetary Fund, European Union and World Bank, meaning that

the period required by foreign partners was extended from three years (2015-2018) to six (2015-2021), and the rate of price increases was distributed evenly throughout the period, a rapid increase in the ﬁrst period having been rejected. Also, the Romanian side insisted in the negotiations that the alignment of domestic gas prices be done annually and not quarterly or twice a year,” government oﬃcials told the press at the beginning of July. Following the hike to RON 60/MWh, the timetable announced by the government sets out an annual increase until 2017, so on July 1, 2016 the price will rise to RON 66/MWh and in

April 2017 to RON 72/MWh. Commentators say that both the electricity and natural gas markets are experiencing drastic transformations that will entirely change the electricity market in the coming years. Analysts predict that the price liberalization and gradual opening up of access to a large number of potential customers for new players will threaten the positions of traditional leaders. Competition will increase once players outside the traditional market enter the free market. The liberalization of the energy market is a sensitive issue that experts say is poorly understood by the public,

as it is more complex than it seems at first glance. At issue are both an obligation under European regulations and putting the customer at the center. The market is therefore expected to be characterized by two main factors: transparency and competition. Until January 1 of this year, local gas market liberalization had two different calendars, one for industrial users and another for households. Since 2015 the price of gas for industrial consumers has been liberalized, being maintained on the regulated market only for households and heating producers for the required quantity of gas needed to produce thermal energy for domestic use. For household customers, the gradual elimination of regulated tariffs began on July 1, 2013 and will end on December 31, 2017, marking the abolition of regulated tariffs for households. When the regulated tariffs are partially removed for consumers without the eligibility right, some of the used electricity is charged at the regulated tariff and the rest at a rate established by the National Regulatory Authority for Energy (ANRE). Under the timetable for eliminating the regulated tariffs for the supply of electricity to end-users, approved by the government in March 2012, the gradual elimination of regulated tariffs for non-household customers began on September 1, 2012 and ended on December 31, 2013, which marked the completion of the liberalization process for non-household customers. The final price of energy depends on several factors, including current market supply and demand, domestic and import purchase prices, network costs, environmental costs (green certificates), the level of excise duties and taxes set by the authorities. Pundits say a liberalized energy market involves higher competition, consumers’ right to freely choose their supplier, transparent pricing and encouragement of investments in the energy sector, all of which improves consumer welfare. In terms of utilities, competitive retail markets may provide new business opportunities that

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allow them to evolve from being mere commodity sellers into complex service providers. The short-term outlook suggests that the price could drop, given the increasingly strong competition between providers. According to electricity market operator OPCOM, in April the average trading price was EUR 26/MWh compared to EUR 36/MWh last year. The price decrease continued in May, with energy traded at an average price of EUR 27.5/MWh versus EUR 29.2/MWh in the same period of last year. “The commissioning of the new generation capacities, especially renewable – provided that a significant increase in domestic demand is not projected and export is limited by the existing capacity – could bring down energy costs. However, the current price of energy is still affected by subsidies and low efficiency in the generation market,” E.ON Romania representatives told Business Review. “Competitive generation is vital, especially now when Romania has connected its market to the neighboring ones. Inefficient capacities remain a problem because they generate increased costs – they must become efficient and competitive if they are to survive in a competitive market.” CEZ Romania representatives told BR, “In Romania, the gradual market opening for household customers

27 eNerGY brings about a ﬂuctuation in prices. To explain, currently two amounts of electric energy may be found on customers’ bills, representing consumption according to the indexes on the counters or the mechanism agreed by the parties for the determination of consumption. Each is charged at the regulated price or competitive market value, in proportions corresponding to the degree of market liberalization set by the authorities for that period. For example, since July, 50 percent of the consumption is charged according to the competitive market and 50 percent according to the regulated price. The regulated price has been subject to ﬂuctuations of 1-2 percent, depending on the factors taken into account by the National Regulatory Authority for Energy.” ANRE organizes electricity purchase session for the competitive market in order to ensure a uniform price across the country. Aurelian Sideri, marketing director at Enel Energie and Enel Energie Muntenia, told BR, “Lately, prices have been decreasing. Regarding the production capacities installed in Romania, we can be only optimistic. Romania’s production capacity currently exceeds the consumption volume, which naturally leads to price decreases. For a while now, the new production capacities from renewable sources that are supported by the

green certificates scheme have been working, some of the initial investments have been recovered and a large proportion of the national consumption has been covered.” Currently, ANRE Order no. 92/2015 – the methodology for setting the tariffs providers charge end-users – is in force. The legislation grants all household customers, as well as non-household customers with an average of fewer than 50 employees and an annual turnover or balance sheet asset value of or below EUR 10 million, according to the annual tax reports, the right to the universal service (US). According to statements by E.ON Romania, market liberalization benefits consumers, who get better quality services and competitive prices. But the rate of liberalization must fit consumers’ ability to adapt to this process, as it was found that a too fast rate creates difficulties for consumers, even up to insolvency. E.ON representatives added that it is for the authorities to decide the timetable for liberalization, but the process should be reasonable and prices sustainable for consumers and accompanied by protective measures for the disadvantaged. In their turn, representatives of CEZ Romania said that a too strict regulatory framework was not likely to encourage the real liberalization of en-

ergy prices. The law of supply and demand shapes fair prices more than any regulation. “A priority for authorized institutions must be the permanent monitoring of energy market participants’ behavior and the punishment of deviations from the correct approach,” CEZ Romania oﬃcials told BR. The risks that may arise, Association of Electricity Suppliers in Romania (AFEER) representatives recently stated, include unfair/incomplete offers from some suppliers that may mislead consumers by eliminating binding components such as, for example, the consideration of green certiﬁcates and/or radio-TV license. However, the unsustainable promise to improve the technical performance, including voltage, response time and extent of interruptions, which are the responsibility of the local distributor and not the supplier, should give consumers pause for thought. “The main players are the customers and we take care to keep them actively informed. We are introducing new products and services, thereby preparing all our clients for the total liberalization of the market. This is not just about the price changes, but an increased quality of the services provided, which is a constant,” said Sideri. editorial@business-review.ro

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28 eNerGY

Cernavoda units 3 and 4 reach last phase of talks Nuclearelectrica is entering the final phase of negotiations over the construction of units 3 and 4 of the Cernavoda nuclear power plant. The reactor construction project is currently valued at EUR 6.45 billion, although the feasibility study determining the required investment is to be revised.

Proponents say that nuclear energy is currently one of the cheapest low-carbon electricity generation technologies, eﬃciently replacing the old fossil fuel power plants

∫ Laura GriGore The Romanian nuclear energy company Nuclearelectrica hopes to finalize an agreement with the Chinese group China General Nuclear Power Corporation by end-2015. Currently, the two companies are in talks over the Memorandum of Understanding that covers implementation. According to a statement made to the media by Nuclearelectrica, talks are progressing as expected and an agreement is expected to be reached by end2015. According to the official strategy for the project’s first stage, the new project company will be established exclusively with cash contributions from Cernavoda and the selected private investor, with a ratio of 49:51 percent. Cernavoda’s initial cash contribution will be a maximum of EUR 2 million. The company’s minimum share capital will be structured so as to allow Cernavoda and the Romanian state to fully contribute in cash to the project, and make other initial and subsequent contributions in cash. “Negotiations are proceeding normally and reflect the importance of this step of the selection procedure. Both sides understand this and are acting to secure a sound draft, to meet the Ro-

manian state’s long-term needs from the energy system through to the final consumer,” Nuclearelectrica officials told Mediafax. “We think that we can reach an agreement by the end of this year.” After this, the next step is the approval of the memorandum by the General Assembly, the signing of the investors’ agreement and the founding of the new project company, “a joint venture in which the selected investor will hold at least 51 percent of the shares and Nuclearelectrica will contribute with the assets it already owns and which we should make full use of,” added officials. In 2014, China General Nuclear Power Corporation was chosen to develop units 3 and 4 at Cernavoda – the only company to have submitted an offer to participate in the tender organized by the Romanian state last year. In October 2014 the company signed a deal with the state that heralded the start of negotiations on the Memorandum of Understanding to take the project forward. The technology to be used in the project is CANDU 6. Using as a reference Cernavoda unit 2, it has been improved by the owner and the Romanian state to secure European Commission approval under the Euratom Treaty (which established the European Atomic Energy

Community), and following postFukushima analysis. The government has pledged its commitment to nuclear power. The state identified an increase in Cernavoda’s energy production capacity through two additional units as the best solution to cover the capacity deficit after 2020, technically, economically and within the timeframe, and in terms of using internal resources and existing national infrastructure developed on CANDU technology. Plans for the construction of the two nuclear reactors, valued at EUR 4 billion, were followed by the establishment in 2009 of a new project company, EnergoNuclear, to oversee the completion of units 3 and 4. Work was expected to start in 2010. Initially, various companies were interested, such as Enel (Italy), ArcelorMittal Romania, Nuclearelectrica, CEZ (Czech Republic), RWE (Germany), Iberdrola (Spain) and GDF Suez (a French-Belgian group). However, dissatisfied with the progress of discussions, CEZ, RWE, Iberdrola and GDF Suez withdrew their interest in late 2010 and the company is currently 100 percent owned by Nuclearelectrica. The state has been looking for new investors to enable Nuclearelectrica to reduce its share. The Cernavoda nuclear power plant project represents an investment in low

carbon emission technology, which the state sees as essential for Romania, in the framework of the ambitious decarbonization targets set at European Union level, namely to reduce greenhouse gas emissions by 40 percent by 2030. The project is part of the envisaged future energy mix in the National Strategy of Power Development for 2007-2020. Proponents say that nuclear energy is currently one of the cheapest low-carbon electricity generation technologies, efficiently replacing the old fossil fuel power plants. The Romanian Energy Strategy for 2007-2020 also notes the importance of nuclear energy, given the limited natural gas and coal resources and the need to obtain competitive prices for electricity produced at lower CO2 emissions. However, nuclear energy remains a highly controversial subject. Opponents say it poses serious risks to public health and the environment, and point to the many nuclear accidents that have taken place. The Cernavoda nuclear power plant was designed with five CANDU 6type units that use heavy water as a moderator and primary coolant and natural uranium as fuel. Works at the site started in 1980, with the intent to build all five units. editorial@business-review.ro

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30 MARKETING

Roaring success: Cannes Lions 2015 blurs lines between creativity, technology and entertainment Many of the world’s top creatives under one roof, networking with the biggest names in advertising, inspiring seminars and presentations, wild parties and disputed awards – this was Cannes Lions 2015. Local industry professionals shared their views on the festival – good and bad – with BR, reflected on their award hauls and set out their ambitions for next year’s event.

Ana-Maria Diceanu, head of the crisis management division/PR director at GMP PR

∫ ROMANITA OPREA Cannes Lions, the world’s biggest annual celebration of the creative communications industry, received a record number of entries this year: 40,133 across Cannes Lions, Lions Health and Lions Innovation. Philip Thomas, CEO of Lions Festivals, said that the ﬁgures showed an “industry that believes in the power of creativity as a driving force for business and for brands. The Lions are a proxy for great creativity, and it is exciting to see marketers globally pushing themselves and their agency partners to produce truly outstanding work, and having the conﬁdence to bring it to Cannes Lions to compete on the world stage.” Agencies worldwide upped their interest in categories such as Creative Effectiveness (which saw its number of entries double from last year), Branded Content & Entertainment (with an 18 percent rise), Film (8 percent), and Film Craft (over 6 percent). The festival’s new category, Glass Lion: The Lion for Change, created to address issues of gender inequality and prejudice, received 166 entries in its launch year. Meanwhile, Lions Health, the global creative festival for healthcare communications, attracted 1,862 entries in its

second year, a 30 percent increase. Lions Innovation, a new festival that brings together data, technology and creativity, received 226 entries under the Innovation category and 619 entries for Creative Data. Japan, the UK, USA and Germany are the stand-out countries in terms of entry numbers. Despite the international growth of the festival, this year Romania submitted a total of 144 entries – a slight decrease compared to last year’s 151 – from 21 agencies. Local players competed this year predominantly in the categories: Media (29 entries), Direct (26) and PR (20), followed by Promo & Activation (18) and Cyber (15). Outdoor (11) and Mobile (8) attracted a moderate number of entries, while Film (5), Press and Design (4 each), Creative Effectiveness (3) and Branded Content & Entertainment (1) saw fewer entries from Romanian ﬁrms. According to the Cannes Lions organizers, the Romanian advertising industry was also present in the newly launched competitions, with four in Health & Wellness (Lions Health) and three in Creative Data (Innovation Lions). “All agencies are now doing communication; we no longer speak about PR, advertising and digital. All of these domains are now about starting and fueling a conversation with the client, who

Jorg Riommi, chief creative director at Publicis Romania

is constantly under information siege. Brands are now ﬁghting to ﬁnd ways to make the conversation happen online; it doesn’t really matter if it’s PR, digital or advertising agencies doing it. Nevertheless, PR has an advantage, which is crisis communication, and there are so many crises going on out there,” Ana Maria Diceanu, head of the crisis management division/PR director at GMP PR, told BR According to Jorg Riommi, chief creative director at Publicis Romania, Cannes is refreshing, inspiring and a true power-up. He has regularly attended the festival since he started in the business, except last year, which has given him some perspective on what happened in 2015. “This year I focused on the speakers and seminars – after all, it is very easy to see all the work online – to grasp the moods, trends and major conversation topics, to get the pulse of the industry. I also believe it is an unbeatable opportunity for networking and connecting with fellow creatives and leaders from the other markets, especially now we are in a big, new network like Publicis,” Riommi told BR. Having attended the Cannes Lions festival every year for almost a decade now, Razvan Capanescu, chief creative director at Leo Burnett Romania, con-

siders 2015 probably the most hotly fought competition yet. “There was a record number of entries and probably a record number of awards going to social campaigns. We saw a Grand Prix for a non-brand of a non-client (the Buenos Aires Public Bike System) and small jokes like Beer Tooth Implant getting a Titanium award. At the same time, big campaigns for big clients (like P&G and Samsung) did very well, and that’s a good sign,” said Capanescu. He also found some of the seminars inspiring. “Marilyn Manson was a surprisingly down to earth guy, who meant business. The Google Beach and Facebook Beach were the most generous oases for festival delegates and the rosé was never in short supply at the parties! We should expect robots (human-like androids with synesthetic skin and all) as receptionists sometime soon,” said the Leo Burnett representative. For Capanescu, Cannes 2015 was also more futuristic than previously, and the Direct category became one of the most powerful and inspiring. “What I liked a lot this year was that I saw innovation as a smart thought, not just as a simple use of technology. For example, The Lucky Iron Fish – even though the idea didn’t belong to the agency that entered the work – the Samsung Truck

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MARKETING 31

Claudiu Dobrita, creative director at FCB Bucharest

Felix Tataru, president of GMP Group and global senior vice-president of the IAA

and the Volvo LifePaint,” noted the tions in front of large crowds and just chief creative director of Leo Burnett say, “Hi”, not leaving any great idea behind them. Nobody argues that they Romania. However, some voiced reservations. shouldn’t have been invited in the first Riommi commented, “I think Cannes is place; on the contrary, it has a positive growing and growing, and with it, its effect by triggering conversations about ego. I’m afraid it might be losing its creativity in entertainment. “It also focus on real work for real people and pumps up the advertising creatives’ real brands and products. It seems to egos by making them think they could me that if you are not social or don’t also do well in showbiz, if they wanted stand for a cause, you are not trendy to. This is the power of a big festival. To enough for Cannes these days. That’s a create inspiration beyond negativity. bit weird, I think. It’s good to want to And that’s why it will continue to make save the world and get involved with creative people from all over the world good causes, but as a creative this also fly to the French Riviera,” concluded makes me a bit sad somehow: seeing so the executive creative director of Mcmuch social work awarded, or work Cann Erickson Romania. 2015 was another good year for that has mostly social implications, makes me think of recessions and rea- Dobre’s agency, which went home sons why we’re not seeing as many awards for the fifth year in a row. This year’s winning campaigns were “Sungreat ideas from brands instead.” He also believes that while it’s good day Grannies” and “Ghita, the Social to promote gender equality by intro- Shepherd”, both for the same client, ducing more awards like the Glass Lions, Vodafone Romania. “Ghita, The Social or expand side competitions, like Lions Shepherd” took a Bronze in the Creative Health and Innovation Lions, the busi- Effectiveness competition, which is a ness side of the festival machine and first for Romania. Meanwhile, “Sunday the internal politics are taking over Grannies” scooped two Bronze Lions in somewhat and distorting the real rea- Promo & Activations and one in PR. son for the awards. “This is my opinion, With these new Lions, McCann from what I have personally seen. But I Bucharest’s total haul at Cannes Lions have been reading similar stories all reaches 21 in five years. “I am really proud of our performance over the media,” the Publicis creative because I know the daily hard work beconcluded. On the same theme, Catalin Dobre, hind it. We managed to win all our executive creative director at McCann awards with big campaigns, with big Erickson Romania, believes that Cannes clients. This promotes a culture of puthas created an ecosystem of creativity ting in an effort and doing great work on that produces inspiration. The genius in the day-to-day briefs, not waiting for a it, as he describes it, is that the organiz- ‘creative opportunity’ to come along and ers managed to create a mechanism make a push for awards. This attitude where even the bad things in the festi- can ruin an agency because it creates a val are needed to make it work. “Take separation between daily work and ‘festhe controversy surrounding the win- tival’ work and people end up having ners for instance. I haven’t heard any- the wrong focus,” said Dobre. He added, “We are building this culbody say, ‘Next year, I’m not entering work at Cannes.’ Instead, I hear endless ture at McCann and we have proved it discussions starting with, ‘This is not a works because we have won at Cannes Grand Prix, not in a million years… for five years in a row. And I love it be’ that end with, ‘We must do some great cause this raises the ambition in all of work next year’ Cannes has this weird, our clients. Everybody wants work enbut beautiful power,” commented tered at Cannes because they know this is not crazy creative work created espeDobre. He gave the example of the big en- cially for the festival – it’s work that sells.” Reflecting this, all McCann Erickson tertainment names who have presenta-

Romania’s Cannes winners were also Effie winners. Such awards represent a challenge for the agency, in Dobre’s view: not to let its courageous clients down. “It’s also pretty cool coming to work and knowing that you are creating work for ambitious people with the same aspirations. We are really proud of bringing the first Creative Effectiveness Lion to Romania. It’s a rare one. This is a new category in which you can enter only winning work from the previous year. To keep it short, it means three things. One: consistency. We win every year and this allows us to enter this category. Two: real clients with real challenges. Our winning work makes a difference to our clients’ business. Three: creative work sells. This category awards work that stands out not only for the freshness of the idea, but also from a sales perspective,” outlined the executive creative director. Also celebrating is Riommi who brought home Publicis Romania’s first Bronze Cannes Lion this year, with the campaign #seatbeltb00bing for ACR, in the category Promo & Activation/Use of Social Audience. “Considering that I started in Publicis on 1 July last year, and I had to get all the teams and clients from scratch, find the ideas worth fighting for, sell them, pack them at the highest standard and all this in basically just nine months, I can say it was almost a birth! It is rewarding to have managed, with such a great team and client, to bring the first Lion for Publicis Romania in my first year here. I think it is a great sign of agency culture switch and that everything we want is within reach, and I can tell you this is just the beginning of a larger process, raising the creative quality bar for all our clients in the coming months,” said Riommi. Dobre notes that success for a local agency also improves the national industry’s standing, creating a virtuous circle. “It was a great year for us and for Romanian agencies. We have the responsibility to build a creative reputation in Romania. Only this way will we not be seen as outsiders in Cannes. And this will help more and more agencies to win at the festival. Also, if we keep up

the good work, in a few years this reputation will help us attract talent from abroad. Creatives from all over the world will start to see Romania as a destination for creating great work. We started with a boom five years ago, bringing the first Grand Prix to Eastern Europe,” remembered the director. He is also happy that more Romanian agencies are starting to bring Lions home, such as the likes of Geometry Global and Publicis this year. “There needs to be a collective effort in order to build a country reputation. To quote Vodafone: together we are stronger,” added the McCann representative. This opinion is shared by Capanescu, who believes that Romania, as a country, did rather well this year, getting closer to a two-digit annual tally of metal Lions. “We’ll probably be more visible on the industry’s global map from that point. But most importantly, another milestone was achieved this year – the first Creative Effectiveness Lion won by an agency from Romania,” said Capanescu. As for his firm’s performance, according to the director, Leo Burnett Romania just started, a few months ago, a company transformation (blending its digital and shopper capabilities into its creative teams and processes, for a seamless integration). So, it is still relatively young as a modernly structured agency. “Nevertheless, Cannes 2015 was not a bad year for us at all, as we made three shortlists, in different categories (Direct, Promo & Activation and PR). Considering it was the year with a record number of entries and that only around 2 percent get to be a finalist/ on a shortlist, then it’s really not too bad. Personally, I enjoyed the Croisette even more this year having won one Bronze Lion (at my previous agency, Publicis) and made five shortlists in total,” said the Leo Burnett creative. For Claudiu Dobrita, creative director at FCB Bucharest, Cannes is like an old friend: you have to forgive its issues for a greater good. “It’s not perfect; it’s not what it used to be. But it inspired you once to do great work and you can only hope things will come around once

www.business-review.eu Business Review | July 2015

32 MARKETING

Mircea Pascu, managing director of Geometry Global Bucharest

Catalin Dobre, executive creative director at McCann Erickson Romania

more. It’s not a country affair, never tor Mihai Fetcu and his team, consisted Stefan cel Mare, by Razvan Capanescu, was. It’s a network-within-holding-af- of removing the color red from the to be awarded. However, it was shortfair. Big communication groups claim news, with viewers only seeing green listed which is no small thing. The rest, supremacy and put their champagne and blue on their screens. The idea won with the exception of McCann, were on ice as the days go by, based on live Gold at PR Lions, Silver and Bronze good ideas, commonly promoted,” said rankings and on-the-spot previsions. Media Lions and another Silver in Tataru. Romania is still struggling compared to Promo & Activation. The campaign was On the same theme, Riommi added, other corners of the globe. Yes, if we also nominated in the Health Lions Gala. “I would have expected more success for “I am more than happy. It proved to the drinkable ads from Coke look around in the region, we’re quite good, but we’re far from where we want us that Cannes is not an unattainable Zero/Shazam, and maybe also for the chimera and that our team is 100 per- Dove ‘Choose beautiful’ campaign that to be,” he argued. In turn, Felix Tataru, president of cent ready for the forthcoming editions. I think was a bit overlooked. I also must GMP Group and global senior vice-pres- The award-winning entry includes a say I had expectations for our ACR ident of the International Advertising powerful idea that inspires people to Street View Test campaign – which I Association, thinks this year’s Cannes change their habits and behavior. And find a simple and clever innovative Lions was different from previous years. this is what was recognized throughout platform that was overlooked by the juThe IAA and Cannes Lions signed for the festival,” added Pascu. ries,” he commented. According to Tataru, this year’s the first time a partnership that enabled With creativity commonly seen as IAA members to meet VIPs from the nominated and winning works were one of the most subjective elements of global marcomm industry at the IAA proof that creativity could be Romania’s advertising, almost all the industry inHut on Croissette Boulevard, just near best ambassador – not only at this festi- siders canvassed by BR thought that val celebrating communication, but something of theirs was overlooked. the Palais de Festival. “This was an opportunity that made also in festivals celebrating culture. While Capanescu expected the “too inmy festival experience even more valu- “I’m sure we could give examples in formative” film execution from the “DU able. Another novelty was the introduc- other areas as well, as we have valuable – two cinema tickets for the price of one” tion of Lions Innovation, a unique ideas. But I don’t think we are that great campaign to win big, as he found it a two-day event where data, technology at implementing them or promoting brilliant piece of cinematography and and creativity intersected. Likewise, them. I saw, here, weaker ideas still wonders why it didn’t, Pascu hoped this edition gave greater social impor- awarded just because they had perfect that his agency’s campaign “Read a tree. tance through Glass Lions – a category presentation movies. We do not lack Save a Book” for elefant.ro would catch that awards campaigns that support ideas, but we toy with them rather than the jury’s attention. women’s rights and discourage gender take them seriously or constantly im“This mobile app (Read a Tree) had a plement them. If we add such ingredi- huge impact on the local market – in discrimination,” said Tataru. It was the first visit to Cannes Lions ents as seriousness and consistency, terms of media coverage, reviews and for Mircea Pascu, managing director of Romania might become the Brazil of downloads. It seems that a Gold won at Geometry Global Bucharest. After Europe,” added Tataru. a local mobile festival does not equal at seven days, over 30 speakers, more least a nomination at Cannes Lions. But than 100 gold-winning campaigns and Expectations versus reality looking back at the award-winning endless magnums of rosé, the Cannes Almost all the Romanian agencies were campaigns in the Mobile category, all Lions festival proved for him to be the impressed by the RGB campaign and emphasized advanced technology solugreatest multicultural advertising expe- hoped it would win, according to the tions over creativity,” said Pascu. rience. On the subject of the growing trend GMP Group president. “As I said on the “I cannot say that just a particular Effie stage, when the campaign was to blur the lines between PR and adverpart of this story deserves to be high- only awarded Bronze, it deserved more, tising, Diceanu considers the Cannes lighted; the Cannes Lions festival expe- and I am glad this international jury Festival a traditionally advertising rience should be seen as a general state was more generous than the local one. event, although it is positioned as a fesof mind,” argued Pascu. For Geometry It is a learning experience for us to be tival of creativity, to reflect that it is Global Bucharest it was also a time for more positive and appreciate value about much more than advertising. “PR celebration: the agency won four Lions when it exists. It is not normal to expect is doing better every year, but the PR this year for its “RGB News” campaign, recognition when you do not have the community still has a lot to learn, especreated for Antena 1 TV station and its ability to do it, and I’m referring now to cially about how to enter. Advertising Observator show, which promoted the fact that there is no creativity festi- agencies are better at doing this. I think blood donations by showing people val in Romania. Coming back to the this year’s Grand Prix winner, #likeagirl, how life would literally be without red. Cannes Lions results, I expected the pro is a fantastic campaign no longer about The idea, developed by creative direc- vote campaign with Mihai Viteazu and selling goods, but about dealing with

social issues and making the world a better place. This is a new development. PR agencies are recognized in Mobile, in the Glass Lion category, in Media and in Promo & Activation, but they need to do better, and enter more of their best works,” said the GMP PR representative.

Technology versus creativity As more and more voices are arguing than the festival is losing its focus on creativity and becoming more about technology and its use, local industry specialists still believe that Cannes is ﬁrst and foremost about the power of an idea and the unique way of emphasizing it. “I had this feeling while watching the winning Mobile entries, but I tried to understand the cultural dimension and what the judging process is all about. Moreover, data and technology are redeﬁning creativity and the festival explores exactly what these changes mean today and in the future. And this has become a serious subject, the reason why the Cannes Lions Innovation festival was introduced,” commented the Geometry Global Bucharest representative. At the same time, Cannes also introduced the Glass Lion this year, proving that it’s not just about the means, but about the impactful change one campaign can produce within a socio-cultural environment. “Cannes is not losing focus, Cannes is adapting just like advertising is adapting – and some people just can’t keep up,” said Pascu. For Capanescu, the festival stands, as always, for creativity, in whatever shape or form (for good or ill). “Some call it ‘the rise of the machines’. And it’s partly true; I saw powerful demonstrations of applied technology serving as campaigns for different brands (such as a freakishly real cyborg already interacting with humans). But the good tech-driven campaigns had a purpose. And it was technology crowning an idea, not an excuse for lacking an idea – even though there is more of the latter,” he said. Dobre added, “Cannes is about new ideas. Today we’re living in a world

www.business-review.eu Business Review | July 2015

MARKETING 33

OPINION Alexandra Iavorschi Managing director, StarcomMediaVest Group

Media and creativity are co-existing and enlarging their potential Razvan Capanescu, chief creative director at Leo Burnett Romania

where ‘new’ comes a lot from technology. It makes sense; there is nothing to be scared of. Technology has the power to make our ideas big. Stuff that maybe at some point you would have entered in film as fiction now is really possible and can really make a difference. There is also discussion around how much we see new ideas and new technology. From my point of view, the idea always comes first. The technology only makes it possible and bigger. I trust the jury to always make this distinction,” he noted. Dobre also thinks that Cannes is making a push to have as much innovation in the festival as possible. “They saw a possible tension between innovation/technology and creative ideas and they took action. Now there is a clear distinction between Cannes Lions and Lions Innovation. What started as a category is now taking shape as a standalone part of the festival. So I am looking forward to seeing how this develops,” added the McCann Erickson creative. His opinion is shared by Claudiu Dobrita, who also believes that Cannes has always been about creativity. “Everything else depends on how much this industry can reinvent itself without losing its self-esteem,” added Dobrita. Meanwhile, Riommi considers technology just a tool, saying that you have to feed it ideas to make it work. “Technology alone doesn’t do the job. That said, it is empowering, as it opens up new possibilities. I’m not against technology, I’m against technology for its own sake, that overcomes ideas,” he said. “Cannes Lions is pushing generations of creative people to reach unknown and as yet unseen targets. I think that we are irrelevant if we do not take into account what is happening with the consumer today. And the main screen in the consumer’s life is the mobile phone. This is the source of new technologies and it is natural that Cannes Lions takes into consideration the latest trends. Creativity does not come into contradiction with technology,” concluded Tataru.

With an eye towards 2016 While Publicis is looking for a Gold in 2016 and its professionals are ready to work for it with their clients and team, Pascu and Geometry Global Bucharest say they want to be able to reﬂect the drive they took from the festival onto the team and their clients and make them realize that Romania has only just begun telling its success story in Cannes. The same stance is taken by FCB Bucharest which wants to be present and matter. “Real work brings real pride – the kind that lasts,” said Dobrita. Tataru has a different mindset, namely that is useless to go to Cannes if you do not make an effort to change your professional life. He says he will try to implement some of the things he saw at Cannes at GMP Group, but at the same time admits that the ﬁrst to judge these measures will be the clients, then the consumers and only afterwards the Cannes Lions jury. Remaining on the jury theme, Capanescu is hoping next year for more scrupulous juries (who take their time to discern bogus from meritorious) and bigger and better campaigns from his agency, sure that a combination of these factors will naturally result in increasing the number of metal Lions for Leo Burnett. Others have similarly high expectations. “I want to have the biggest and happiest delegation of agency people and clients in Cannes. This means more clients on the winning list and most of our creative teams with great entries in the festival. I want a reason to party every night. This means entering work in all categories, including the ones from the last night gala: Integrated and Titanium. I want more Romanian agencies winning. This will mean we are starting to build our country creative reputation,” said Dobre. Offering a PR perspective, Diceanu believes that the PR industry should learn how to make video entries in order to have its work submitted at a festival where advertising is more empowered, as is the case at Cannes Lions. romanita.oprea@business-review.ro

Creativity in media is no longer a “nice to have”, but more of natural and necessary state of mind. This year’s Cannes festival was under the sign of the triad: creativity – media – utility. If we look closely we can see that the majority of the Grand Prix winners are developed starting from these three key points. The Media Grand Prix winner Vodafone, Right Application is a very good demonstration of a powerful idea, based on local insight, and innovation in terms of media approach. It involved an attentive and refined selection of media channels and demonstrated its efficiency through its results. Helped by technology, media is no longer a simple vehicle, but a true experience and facilitator. Following this year’s festival we can confirm some trends that are here to stay: The “empowerment” of a brand has become the most important currency. The more brands are building in this direction and in a more authentic manner, that is relevant to the consumer, the more the latter’s interest and long-term engagement are rising exponentially. Whether we refer to a certain cause or to combating stereotypes (for example the P&G campaign, #likeagirl), brands that are advocating for a well-defined cause or an idea that can surmount a barrier are receiving the vote of confidence and the support of the desired target much faster than before. Technology and data are functioning in a complementary and interde-

pendent manner with creativity and emotions (“Clever Buoy”, a Lion-winning campaign). Relevance is critical. Whether we’re talking about narrative brands/campaigns or media channels, brands that are really bringing something useful to the consumer or starting a conversation in an area of interest are the ones receiving accolades, translated into engagement, becoming viral, proving their social activism. Also, the “native content” area is becoming more and more interesting and appealing. The art of storytelling (in a CPM world). There is saturation when it comes to the number of messages and topics of conversation, which can be stopped by quality and greatness in brands’ way of building stories, through the art of building interest from beautifully explored insight. Even an extraordinary ad can be in the end an “intrusion”, an “interruption” of the program. Given that advertising is more and more “on demand”, storytelling gains a vital role and importance in the scenery. Programmatic is sexy. One of the hottest topics is programmatic advertising. Even though it’s merely a tool of media & performance, it is proving to be extremely useful to creatives in order for them to create customized ads, based on the consumer’s behavior, the context and a series of variables that are influencing the engagement component. Programmatic media is a tool that is generating a new type of creativity and the beginning of a new advertising era. Content marketing has become a reality and is reflected in the creativity part, as a section of the briefing, but also in the planning, buying or programmatic aspect. Cannes Festival is an aggregator of beautiful people, creative enthusiasm, talent and know-how. “Big ideas” need strong insights, data/proof and technology. But also the ability to use all these notions and concepts, transforming them into something revealing or at least authentic. romanita.oprea@business-review.ro

www.business-review.eu Business Review | July, 2015

34 INTERVIEW

GreenGroup co-founder: ‘There are not enough waste collection points’ GreenGroup, which currently comprises six waste recycling and management companies – GreenTech, GreenFiber International, GreenWEEE, GreenLamp Reciclare, GreenGlass Recycling and Total Waste Management – has invested EUR 70 million since starting operations in Romania 12 years ago. Constantin Damov, co-founder of the group, tells BR why waste collection is difficult in Romania and what can be done to change that. ∫ oTILIA HARAGA Romania is in last place in the EU for recycling urban waste. Why do you think that is? Inefficient waste collection is one of the weakest links in the recycling industry. Currently, the collection of recyclable waste post-consumption cannot ensure enough volumes so that industrial operations go smoothly and recycling has a real impact on the environment. For instance, take our glass recycling unit Green Glass, which started working in December 2013 and in which we have invested EUR 4 million. Even though it has last generation equipment and is fully compliant with the “End of Waste” criteria (the guarantee that the waste is processed and transformed into products and thus no longer has waste status), it does not receive the necessary quantities of waste to work at full capacity. With a processing capacity of 110,000 tons annually, Green Glass could process all the glass generated in Bucharest in an entire year in just 11 days. In spite of this, glass packaging is not collected at all post-consumption and ends up in garbage dumps, polluting the environment. This is the situation across the entire recycling industry in Romania. At the moment, recycling plants receive less than 10 percent of the waste produced locally. What measures do you think should be taken to improve the waste collection rate? Improving selective collection, with a direct impact on growing the volume and quantity of waste that reaches the plants, would be the first step. Recyclable waste is the type that can be re-processed and re-introduced into the economy for reuse. It is, therefore, important that it is not stored with other types, such as food waste. The efficiency of separate collection is measured by the degree of waste sorting in the plants. To give an idea, the plastic waste we receive at the plant is mostly mixed and contaminated with bits of food, textiles, cardboard or metallic impurities. This makes the entire process of transforming the plastic waste into raw matter less efficient and very costly.

What investments are required from the state to increase the recycling rate? Romania cannot make signiﬁcant progress towards reaching its selective waste collection target, which in 2020 will be 50 percent, without introducing a taxation system to discourage throwing away waste randomly at the garbage dump, and with no investments in collection infrastructure. It is hard to estimate the exact value of the necessary investments, but we could say that to set up the minimum infrastructure, it would cost several hundred million EUR. The model of states which have seen good results shows us that there is a series of mechanisms in place, which can discourage the disposal of waste at the garbage dump and stimulate recycling. These include the introduction of a tax on disposing of waste at the dump, banning the storage of certain types of waste and the “pay as you throw” system. The coordinated implementation of these three mechanisms can boost the quantity of waste that is separated and recycled. Do you believe there are enough waste collection points right now? It is obvious that there are not enough collection points and in certain small towns, localities and rural areas, they are non-existent. On the other hand, local authorities lack the expertise and the necessary capital to implement collection systems that can sustain people’s needs and the necessary logistics so that the material reaches the recycling point. We came to the aid of the authorities with a simple and transparent solution, a type of infrastructure that completes the current separate collecting infra-

structure. Under the name Sigurec, we implemented in Romania, first from private funds and then with financing from the Norwegian government through grants (ed. note: non-reimbursable funds of EUR 1.4 million), some automatized stations for receiving the waste, which offer shopping discount vouchers in exchange for the collected waste. Based on intelligent software that records the most important data about the collected waste, such as quantity, weight, and type of material, the Sigurec collecting stations (ed. note: the stations can take up to 12 types of household waste) ensure its traceability. The system generates collection reports in real time, which means we have very clear evidence of the waste that we collect. All the quantities we receive can be reported back to the authorities based on detailed and precise information in the reports. Do you believe the low recycling rate is a result of insufficient education in this field? We would not say that people are not educated enough, but they are obviously not informed. (...) We are still in the stage of lack of confidence and of myths: “What happens to the waste after it is sorted? Where does it go, to the dump or to industry? Are there recycling plants in Romania?” What is needed is accurate information and to show people the final results. If you see with your own eyes that the waste gets to the plant, and if you even visit the plant, and have information on the quantity of waste you have collected, you are more motivated. The discount voucher that people receive after bringing their waste is also a guarantee that the waste was recorded

in the system. Moreover, we launched an online platform and a mobile app (Sigurec) that connects people with the collecting system. The voucher they receive contains a QR code and a unique registration number. People can either scan the code with the mobile app or input the unique number on the website www.sigurec.ro and in this way they can see the whole history of the waste they have collected. Starting from these results, the platform calculates the carbon emissions they have saved. We wish this way to inform people and grow their awareness of the impact each of them can have on protecting the environment via selective collection. Can you give examples of case studies of countries where recycling is now a daily practice? Recently, we visited Norway and Sweden, two countries with very good results as far as recycling and collective selection are concerned, which have managed to reduce the waste that goes to the dumping site to less than 1 percent of the total. Here 50 percent of the waste is recycled while up to 99 percent of the rest is recovered energetically. They have recycling parks located outside the city where people go every week and put their waste in special places. This is the result of the implementation of the “pay as you throw” scheme, where the quantities they bring to the recycling park are translated into a lower sanitation bill. Do you think that there are enough recycling plants in Romania or does the market need more? At the moment, the recycling capabilities are higher than the collected quantities of waste made of packaging, electric and electronic appliances, paper, batteries and tires. But there are also waste ﬂows where the recycling capacities are insuﬃcient, such as textile, wood and oil waste. Recycling is a commercial activity on a free, competition-driven market where self-regulation is working. In Romania, the number of recyclers is in direct relation with the quantities that are collected. The development of the recycling market in numbers and size will be the result of the quantitative and qualitative growth of the collected waste. otilia.haraga@business-review.ro

www.business-review.eu Business Review | July, 2015

36 GREEN CoRNER

JAR and Metropolitan Life teach students to save money

Wienerberger completes first zero energy consumption house ∫ ANDA SEBESI Wienerberger Sisteme de Caramizi has launched the first e4 House in Romania. Made from brick, it has almost zero energy consumption. Located in Corbeanca near Bucharest, construction of the property – the first such house in South Eastern Europe – started last year. The concept, developed by Wienerberger, is the result of the European Parliament Directive 2010/31, which says that all new houses built in EU countries from 2020 should have almost zero energy consumption. The 325 sqm e4 House has a ground floor, one upper level and a loft and requires an invest-

∫ ANDA SEBESI Over 2,000 first- and second-graders from primary school were taught to save money and adopt healthy behaviors for themselves and their families within the educational program “Schimbam vieti”, developed by Junior Achievement Romania and Metropolitan Life in 60 schools in 10 cities nationwide. As a result of the program, over 70 percent of students learned that work and its results are important for success, while 68 percent learned the main advantages of saving, said officials. Students were trained by their teachers and 60 volunteer consultants from Metropolitan Life. They reacted to real situations meant to help them make informed decisions in the future. “Financial education is essential and can establish even from childhood financial knowledge that helps Romanians make informed decisions for their future and their families. That is why we support the ‘Schimbam vieti’ program. The results showed us that we contributed to the education of children and supported them to become financially independent in the future,” said Emilia Bunea, CEO of Metropolitan Life. The program aimed to encourage students to use their imagination and look for solutions for different day-today life situations, helping them to assimilate skills and knowledge about the economy and basic financial services. It was developed in 60 schools in Bucharest, Brasov, Constanta, Craiova, Galati, Iasi, Oradea, Pitesti, Ploiesti and Timisoara. The program was launched in 2014 at international level and rolled out in Greece, Turkey, Poland, Spain, Portugal, Bulgaria, the Czech Republic, Cyprus, Egypt, Ireland, Lebanon and Russia. It will be implemented in another 11 countries in Europe, Middle East and Africa. anda.sebesi@business-review.ro

Swimathon 2015 raises over RoN 168,000

ment of EUR 216,000 or EUR 665/sqm. Construction was completed in one year. The company says that the project is a case study for anyone interested in building a house in the near future and is proof that a home with an optimum energy performance can be built with an affordable investment. Oﬃcials say the e4 House respects energy, economy, ecology, emotion and health criteria. This complex approach offers both beneﬁts for the environment and a high quality of living. After the occupants move in, its energy performance will be monitored for 24 months with the help of special sensors. anda.sebesi@business-review.ro

Raiffeisen Bank launches fifth Raiffeisen Comunitati ∫ ANDA SEBESI

∫ ANDA SEBESI More than 230 swimmers and over 1,000 spectators came together at the beginning of July at the Dinamo Sports Club to support 16 local community projects in Bucharest and 48 teams of swimmers. More than 950 donors raised over RON 168,000, of which RON 26,000 was generated at the event. The swimmers did a total of 2,399 pool lengths or about 120 kilometers. The Swimathon Bucharest 2015 campaign is raising funds for projects in different ﬁelds, such as health, education, music, personal development and civic involvement. The budgets of the initiatives involved in the campaign were between RON 8,000 and Ron 27,000. Each team of swimmers had up to ﬁve members, who drew on their social

Raiffeisen Bank has launched the fifth run of Raiffeisen Comunitati, a program through which the lender aims to finance small and medium projects developed in the communities where it operates. The total budget for this year is EUR 100,000. The online contest between social responsibility projects is the first of its kind supported by a bank in Romania. Public votes will count for 50 percent of the final financing decision. The networks for donations. The majority contest will run from July 1 to Septemof the funds raised came from individ- ber 11 on the “grants” section of the ual donors, but companies also con- www.raiffeisencomunitati.ro blog. The tributed. The largest donation from an best ten community projects will be individual was of RON 1,000 while the awarded EUR 10,000. The Raiffeisen Comunitati grants average rate was of RON 145. The Swimathon platform (www.swimath- program aims to support organizations onbucuresti.ro) is still open for dona- that intend to develop and implement tions to support the 16 community programs in fields like financial education, urban ecology, social and health projects until August 5. Public figures, Olympic swimmers, services for the benefit of the commudesigners, radio DJs, actors and man- nities where the bank operates. The winners will be announced by agement consultants were among the individuals who supported the various September 16 after Raiffeisen Bank causes of the campaign, while sponsors verifies and validates the registered of Swimathon Bucuresti 2015 included votes. Some 1,500 projects and 79 winPorsche Romania, BCR, Orange and ners that reached over 15,000 direct UniCredit Tiriac Bank. Now on its third beneficiaries have been registered so run, it is organized by Fundatia Comu- far. The finalist projects attracted over 175,000 votes. nitara Bucuresti. anda.sebesi@business-review.ro

anda.sebesi@business-review.ro

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GREEN CoRNER 37

orange Foundation gives careers advice to hearingimpaired students

∫ ANDA SEBESI Over 200 hearing-impaired students have learned how to communicate more easily, be more conﬁdent in their chances and prepare for a future career through the “Vreau sa stiu” professional orientation project developed by Junior Achievement Romania with the support of the Orange Foundation. Students from seven special high schools in Cluj-Napoca, Timisoara, Craiova, Focsani, Buzau, Galati and Iasi

worked with their teachers using a learning by doing method that was adapted to their specific way of learning. They also received free educational materials and textbooks and participated in “job shadow” events, discovering their future career options. With the support of volunteer consultants from Orange and local entrepreneurs, students explored both possible jobs and the necessary skills for them. They were also encouraged to work in teams and develop their communication skills, organizing debates, role plays and brainstorming sessions. In addition, they found out how about job interviews and learned how to write a CV and cover letter. They were also encouraged to consider the possibility of becoming entrepreneurs and found out how to do financial planning. The project was financed by Orange Foundation within the “Lumea prin culoare si sunet” program. anda.sebesi@business-review.ro

oMV Petrom publishes 2014 community involvement report ∫ ANDA SEBESI OMV Petrom’s main fields of social responsibility intervention in 2014 were education and community development, according to the firm’s seventh community involvement report. The 2014 report summarizes the company’s involvement and presents how it supported, through educational programs, individuals of various ages to develop professionally and personally. In addition, the company was involved in community development through projects that addressed timely needs like improving the local infrastructure. “Our community involvement report for 2014 presents a very important direction for OMV Petrom and shows our support for education, a field that is the base of the development of a strong society. Whether we addressed children or adults, we showed the same interest and managed through our programs to support access to education in rural communities, education for disad-

vantaged communities, education for leadership and performance, entrepreneurial skills and professional training. We intended to contribute to the development of communities, especially of those where we operate, and support individuals who can and want to change something around them,” said Mona Nicolici, manager of the sustainability department at OMV Petrom. anda.sebesi@business-review.ro

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38 TRAVEL

Thuringia – a visit to the heart of Germany From untouched nature to the Iron Curtain, classical concerts to captivating castles, BR took a tour of the German state of Thuringia – and it didn’t forget the famous potato dumplings!

The city of towers, bridges and ﬂowers: 1,270-year-old Erfurt has also gained the epithet of the Thuringian Rome

∫ SIMONA BAZAVAN A national park boasting a primeval beech forest surrounded by medieval castle ruins, a string of picture book towns and cities where history can be seen and felt and one can literally walk in the footsteps of historical ﬁgures such as Martin Luther and Johann Sebastian Bach, as well as traces of the former Iron Curtain – this is the kind of overwhelming diversity travelers can ﬁnd in the central German state of Thuringia.

erected in Thuringia. Memorial sites, border museums and even cycling and hiking trails have been set up along the former border, offering a glimpse of how daily life on the fringe of the Iron Curtain must have been.

“The border wall was not built as a means of defense against outsiders but as way of preventing people from escaping to the FDR,” says Volker Bausch, director of the Point Alpha Memorial between Geisa in Thuringia and Ras-

The mending of a broken heart There is layer upon layer of history to discover in Thuringia, from early medieval times to the more recent events marking the fall of communist dictatorships in Central and Eastern Europe. Over 25 years have passed since the former German Democratic Republic (GDR) and the Federal Republic of Germany (FRG) were reunited, an event that is perhaps most associated outside Germany with the emblematic fall of the Berlin Wall. However, the actual “wall” separating east from west stretched over 1,400 km across Germany, almost 800 km of which were

Beech holiday: Hainich National Park boasts 7,500 hectares of pristine forest

dorf in Hesse. As more and more East Germans ﬂed to the West, the actual border evolved from the early 50s from a simple demarcation line to an ever increasingly fortiﬁed “death strip” . Sim-

ple barbed wire fences were replaced by concrete walls and posts while landmines and police injured and claimed the lives of hundreds trying to escape the GDR. Visitors get to see actual sec-

tions of the border wall installations and the memorial also offers extensive media resources showcasing contemporary accounts of everyday life in the heavily controlled border areas, escapes, forced displacements as well as the joy that accompanied the fall of the communist regime in 1989. The site also hosts Observation Post Alpha, the most important US Cold War observation post in Germany, where original military barracks and equipment can be seen. The post overlooked part of the “Fulda Gap”, an area that would have been a prime invasion route for Warsaw Pact forces had the Cold War erupted into actual warfare; history buffs in particular will enjoy the interactive information resources available here. Art lovers, on the other hand, will wish to linger around the kilometer and half-long art installation featuring 14 monumental sculptures by artist Ulrich Barnickel entitled the “Path of Hope”. And indeed, the feeling one gets here and elsewhere in Thuringia in the many memorials and museums along the former Iron Curtain is one of reassuring conﬁdence in the power of remembrance, freedom and ultimately hope. Perhaps nowhere else is the rupture

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caused by the separation of the two countries in normal life more obvious than in the village of Mödlareuth which became known as the “Little Berlin” after it was literally split in two at the end of the Second World War. A wooden fence was ﬁrst built in 1952 but was replaced with a 700 m concrete wall in 1966 which only came down 23 years later. The Mödlareuth open-air Museum in Töpen, near the border with Bavaria, showcases sections of the border installation and offers a chilling glimpse into its history via an extensive exhibition of photographs and other multimedia resources.

TRAVEL 39 even considered destroying the site, but fortunately never got around to doing so. The castle ruin is some 45 km from Eisenach, relatively close to the Hainich National Park. Also close by is the Trabi Paradise Weberstedt, a must-see for all car lovers and others too. The museum showcases some 20 Trabant cars, and while the brand itself is anything but conventional, the cars on display are altogether unique. There is a Trabant police car, ambulance and ﬁre truck, but also a Trabant campervan, a vehicle equipped with a pool and bar and even a Trabant pope-mobile.

Little Berlin: Mödlareuth village was divided by a 700 m wall

Moving away from the former border in downtown Erfurt, the state capital of Thuringia, the Andreasstrasse Memorial and Educational Site commemorates oppression and resistance during the dictatorship of the German United Socialist Party (SED) in Thuringia. Between 1949 and 1989 the red-brick building was a stronghold of the feared Stasi secret police and over 5,000 opponents of the regime were detained here. In December 1989 this was the ﬁrst Stasi bastion to be occupied by the people in what was to become the Peaceful Revolution. Nowadays the memorial succeeds in catching both the suffocating and dystopian atmosphere of a communist prison and the uplifting optimism of its fall. It offers visitors guided and multimedia-based tours focused on the stories of contemporary witnesses. Traces of the Iron Curtain can also be found in rather unexpected places in Thuringia. The castle ruin Hanstein near Bornhagen is over 700 hundred years old and is one of the most famous castles in central Germany. Due to its proximity to the former border and its panoramic view of its surroundings it was not only closed to the public but it also hosted a military garrison during the GDR. In the 1960s the authorities

foot or bike along numerous signposted trails in the southern Harz Mountains, Eichsfeld, Thuringian Röhn, Thuringian Forest and Thuringian Slate Mountains. Audio guides are available to tell the visitor more about the ﬂora and fauna and about life in the former GDR. Small areas of what is now the Hainich National Park were used during those times and even before as army training grounds, but today the traces of tanks are long gone. Instead, nature was left to be nature, as the motto of German natural parks goes, and visitors can enjoy the pristine

Book value: Martin Luther translated the New Testament into German in Wartburg

beech forest and its unspoiled wilderness. The Hainich National Park is the only one of its kind in Thuringia and the 13th in Germany. It boasts 7,500 hectares of beech forest, which since 2011 have been part of the UNESCO World Natural Heritage. The park offers a variety of activities including hiking tours and interactive educational resources in its tourist center. However, its main attraction by far is a 530-meter canopy walk that allows visitors to explore the forest from a completely new perspective. The walk starts at 10 meters above ground and Germany’s green heart With its vast forests and diverse land- goes as high as 24 meters, meandering scape it’s not hard to understand why its way through the upper tree trunks Thuringia is known as the green heart to reach eye level with the treetops. of Germany. And in a beautiful retort to The highest point is a 44-meter tall tree recent history, nature has even found a tower complete with tree house, which way to transform the former Iron Cur- offers a scenic view of the forest, the tain into something altogether differ- Hainich area and its surroundings. And talking about surroundings, what sets ent. Known as the Green Belt, it is an the Hainich National Park even further area running along the former inner apart is its proximity to numerous culGerman border. Where once the “death tural sites such as the castle ruin at strip” used to separate east from west, Hanstein and the Wartburg Castle as nature has stepped in and found fertile well as the towns of Eisenach, Bad Lanland to blossom as years of seclusion gensalza and Mülhausen. and lack of human intervention have enabled plants and animals to develop Rendezvous in the heart of freely. Nowadays it is a paradise for na- Germany ture lovers who can explore it either by There are over 450 castles and

The car itself is a symbol of the GDR, where it was produced for nearly 30 years with almost no signiﬁcant changes, and still manages to arouse affection. Some of the cars can be taken for a ride and visitors can even rent a convertible Trabant for a picnic. The bad news is that the museum looks like it will be closed at the end of October as the site has changed ownership, but there are hopes that the authorities will manage to ﬁnd another location for the 20 Trabis.

fortresses scattered all over Thuringia with origins that can be traced back to the Middle Ages. Towering over the city of Eisenach among forested hills, Wartburg Castle is one of the most famous in the entire country. The castle dates back to the 11th century but was reconstructed in its present form 800 years later and is now a UNESCO World Heritage site. It was the home and place of work of the catholic Saint Elizabeth, who can be seen on castle walls depicted in frescoes by Moritz von Schwind. But what Wartburg is perhaps most famous for is hosting the excommunicated Martin

Luther in 1521 when he translated the New Testament from Greek into German, a work considered the cornerstone of the modern German language. The study where Luther worked can still be visited. Wartburg also offers a wonderful setting for cultural events all year

Medieval shopping mall: the Merchants’ Bridge in Erfurt

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40 TRAVEL

Gear up: Trabi Paradise Weberstedt hosts 20 modiﬁed Trabants

round, such as the 2015 exhibition of painted portraits of Luther developed in the workshop of Cranach the Elder and Younger, as well as concerts each weekend. Traces of Luther can also be found in the picturesque nearby Eisenach, where he attended school and sang in the choir at Georgen Church. Visitors can also enjoy a museum dedicated to composer and organist Johann Sebastian Bach, who was born in Eisenach and was baptized in that same church. He later sang in the church choir, and from July through to September there is a free organ concert every day at 11am. And because the best should always

be saved for last, no trip to Thuringia should end without a visit to the state capital Erfurt. The vibrant city offers an excellent sample of the best Thuringia has to offer: rich history that can be seen on the city’s streets and in its wide variety of museums and diverse cultural life. All of which is set against the background of the refreshingly laid back city life and the ever present nature. Luther called Erfurt the city of towers and that still applies today. From the impressive gothic ensemble of the St. Mary's Cathedral and the Church of St. Severus to the serene atmosphere of the Evangelical Monastery of St Augustine's, where Luther himself spent ﬁve

years of his life, Erfurt boasts 15 abbeys and monasteries, ten chapels and 25 parish churches. Rediscovered in the 1990s, the city’s Old Synagogue dates back to the 12th century, which makes it Europe's oldest fully intact synagogue. It hosts an extensive 14th century gold and silver coin and jewelry collection, the highlight of which is a unique gold wedding ring, five centimeters in height. Erfurt is also known as the city of flowers due to a rich horticultural background and its summer flower markets, and has won the reputation of being a city of bridges as well. There are some 140 bridges in Erfurt, mainly crossing the river Gera which meanders through the city. The most famous is the 125metre long Merchants’ Bridge (Krämerbrücke). Completely covered with 32 inhabited half-timbered houses, it is the longest of its kind in Europe. There are artisans’ and antique shops to be visited on the bridge, the most tempting of which is the Goldhelm chocolate manufacturer, an ideal place to indulge one’s sweet tooth or buy gifts for home. Merchants’ Bridge lies at the heart of Erfurt’s meticulously restored historic center, amid alleys crammed with quaint half-timbered houses, beautiful Renaissance buildings and small squares packed with restaurants and bars. Amid all this it is not hard to understand why the 1,270-year-old Erfurt has gained the epithet of the Thuringian Rome. To cap it all off, there is a wide array of festivals in Erfurt all year round, such as the renowned open-air Cathedral Steps Theatre Festival, the traditional St. Martin’s Festival in November and the medieval Merchants' Bridge Festival, providing yet another reason not only to discover Erfurt and Thuringia, but to return for more.

700 years old: Hanstein Castle

simona.bazavan@business-review.ro

Field guide

Going up: Hainich National Park

l How to get there: By plane from Bucharest to Frankfurt and by car or train onwards. Deutsche Bahn offers a

direct connection from Frankfurt airport to Erfurt train station, which is within walking distance of the city center. l Where to stay: The next best thing to staying in Wartburg Castle itself is the nearby five-star hotel Romantik

Hotel auf der Wartburg. The 1914 boutique hotel is located some 4 km from downtown Eisenach. In Erfurt, the four-star Best Western Hotel Excelsior is within walking distance of both the train station and the city center. If you are looking for less conventional accommodation in a peaceful and quiet atmosphere, you can try the Evangelical Monastery of St Augustine's in downtown Erfurt. Overall, there are over 1,200 hotels, guesthouses, pensions and campsites throughout Thuringia that can accommodate all tastes and budgets. l Local cuisine: Thuringia prides itself in its hospitality and hearty cuisine. Local specialties include home-made

Thuringian sausages, cheeses and sweets as well as local beer and wine varieties. The absolute star of Thuringian cuisine, however, is the potato dumplings served with different types of roast meat or even by themselves. l Cultural highlights: In 2015 the tourist promotion of Thuringia focuses on the works of Cranach and the theme

of “Art and Bible” as well as the celebration of 25 years of German reunification. Other highlights include the third Thuringian State Garden show in Schmalkalden and a spotlight on local traditions and customs. Next year the focus will shift to nature and the diversity of the local landscapes as well as a state exhibition in Weimar and Gotha on the Ernestines, Thuringia’s last ruling dynasty. The following year will be dedicated to the Luther decade and the 500th anniversary of the Reformation. l Planning your trip: Visit www.germany.travel and www.thuringia-tourism.com for useful information.

Sign of the times: getting close to the Iron Curtain

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42 expat eye

brewing up progress in bucharest’s coffee shops In the last of BR’s regular looks at life in Bucharest and Romania through the eyes of an outsider before the summer break, what the trajectory of the city’s coffee consumption says about the changing capital, while fans at the Robbie Williams concert find that through it all, the organizers don’t offer them much hydration.

∫ debbie stowe

Life won’t break me – but queuing for water might Sticking with the theme of beverages, it seems that it’s not possible for there to be a great reaction to a big concert in Bucharest, without an equal and opposite reaction to the poor organization of said concert. The latest example was at the Rob-

from your sponsors – but it only works if you then make it possible for them to buy water. Suppliers Coca-Cola and Ursus have apologized to thirsty fans, both citing the conditions imposed by the organizers. Having to queue for an hour to get a drink is not only annoying, but in Bucharest’s summer heat (and the show was taking place in mid-July, so there was no excuse of having been surprised by the weather, as the organizers of the Roxette concert could have claimed in response to the freak storm that caused problems then) it is dangerous. If reports are true that not even all of the medical staff present had water to give out, this is gross irresponsibility. Concerts in Bucharest are usually extremely well received by enthusiastic audiences and conducted in a great atmosphere (any “Hello Bucharest/Budapest” confusion notwithstanding). Certainly Robbie Williams seemed to think so: after the show he tweeted, “Bucharest: sometimes it’s that good it’s indescribable. As good as any show I’ve ever done... you were unbeatable tonight x”.

Photo: D&D East Entertainment (Alex Csiki)

I can trace my 13 years in Romania not through tea leaves, but through coffee beans. When I ﬁrst arrived, if someone offered you a coffee, it would likely be in the Turkish style: thick, dark, with a layer of sediment at the bottom and made in an ibrik (or cezve as it is known in Turkish), a metal pot with a handle that was plonked on the ﬂame with the water and coffee mixed together inside it. It would generally be served with sugar in it, whether you wanted sugar or not (which seemed a strange, communist way of doing things to someone from a more individualistic culture where we are used to being asked our preferences) and it would keep you awake and shaking until next Wednesday. You couldn’t really add milk because when you stirred it all the bits would rise up from the bottom of the cup and you would end up drinking them. (Plus the milk was often UHT type and you might be thought quite odd for asking anyway.) Drinking this type of coffee was worthwhile as a cultural experience or a social and bonding ritual, even if the liquid itself was not hugely palatable. (This is not to assume any superiority: growing up in the UK in the 1980s and 1990s, coffee generally meant the instant stuff – Nescafe, or Gold Blend if you were really classy. Even now, Starbucks and Costa are seen by many as the apotheosis of a high-end coffee outing, and unless you know where to go and are prepared to be divested of

the best part of GBP 3 – nearly RON 20 – your coffee experience is likely to be fairly miserable.) Jump to Bucharest 2015: what a difference! As the country has shifted its center of gravity from Eastern Europe and the Balkans to look west, Italianstyle coffee has largely elbowed out its Turkish counterpart. While the ibrik still rules the roast in many older people’s homes, younger Romanians are

here had changed the other day, when I made the faux pas of asking for a decaf cappuccino (needed for medical reasons) in a Western style cafe. “We don’t serve decaf coffee,” came the (slightly haughty and disdainful, or was it just me?) reply. “We only serve specialist coffee, and decaf is not specialist coffee.” The barista didn’t add, “So take your non-specialist requests, get out and don’t come back,” but I felt it was implied. Chastened, I ordered a weak latte and slunk away from the counter. There was a time in Bucharest when a coffee shop serving decaf would have been a sign of a modern, progressive establishment. No more. We are clearly living in the post-decaf age.

more likely to use a French press, if not a swanky espresso machine. The announcement earlier this year of Nespresso’s arrival on the local market marks a symbolic moment in Bucharest’s coffee transition. Go into a modern, upmarket coffee shop these days, and if you do see an ibrik, it’s likely to be hanging on the (white) wall as part of the trendy, ironic, post-modern décor. And don’t think about lighting a cigarette. Do expect to pay Western prices, though. I realized how far the coffee scene

bie Williams gig. “Let me entertain you,” ran the name of the tour – and lived up to its offer. But nobody was saying, “Let me refresh you” – or if they were, it was followed by “But you’ll have to queue for an hour.” True, it’s not easy to organize an event for 60,000 people. But you can make it easier by implementing a sensible and eﬃcient system for buying drinks. There is a commercial (if not an ethical) case for taking fans’ bottles of water from them as they enter the gig in order to oblige them to buy water

But while the fans’ enjoyment is repeatedly ruined by woeful organization, the steady convergence of local ticket prices to Western European levels is an insult to the music lovers who make these events so special. Expat Eye is taking a break for the summer and will return to Business Review in the autumn. Please keep feedback and ideas coming to the address below, giving your emails the subject line Expat Eye. Happy holidays! debbie.stowe@business-review.ro

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city 43

fiLm review

the salt of the earth (Le sel de la terre) ∫ debbie stowe directors: Wim Wenders, Juliano Ribeiro Salgado starring: Sebastião Salgado, Wim Wenders, Juliano Ribeiro Salgado on at: Cinema Union, Caffe Cinema 3D Patria Wim Wenders and Juliano Ribeiro Salgado’s documentary is more like an absorbing wander through a photography exhibition than a movie. Its focus is the work – and, to a lesser extent, the life – of Salgado’s father, the Brazilian photographer Sebastião. The former economist embarked upon a four decade-long career, chronicling mainly human suffering and the social impact of war, violence and inequality, as well as the extraordinary lives of remote, indigenous peoples. He then had a surprising coda as a farmer. Although the voiceover alternates between the two directors and the subject, the photos are allowed to do much of the talking, and their wordless revelations are eloquent and moving. From bodies piled up during the Rwandan Genocide in 1994 to emaciated children in camps in the Ethiopian famine of the 1980s, Salgado’s images pack a punch.

Tree of life: Sebastião Salgado’s powerful photography explores facets of humanity In the latter stages of his career, unable to face another harrowing trip to the aftermath of a catastrophe or conﬂict zone, the disillusioned photojournalist concludes, “We are a ferocious animal. We humans are terrible animals. Our history is a history of wars. It's an endless story, a tale of madness.” Despite the horrors presented, however, The Salt of the Earth unfolds calmly, with an almost serene tone. This is partly a result of the veteran Salgado’s ruminations: the directors often shoot him sitting still, gazing out over vast, empty landscapes, contemplating

his experiences. The death and violence is also juxtaposed with the tranquility of the Brazilian’s family home. A former cattle ranch that was once fertile and productive enough to fund the education of Salgado and his seven sisters, it had become arid and lifeless, providing the challenge that will help reinvigorate the jaded photographer in the ﬁnal act. Proceeding logically through Salgado’s adult life and projects, almost biopic style, the documentary’s lack of narrative thrust is compensated for by the force of his work and the green

shoots of hope that permeate the bleaker episodes. Interviews with three generations of Salgados (the photographer, his elderly father and his adult son, the co-director) largely leave the men to express themselves with minimal direction, and the ﬁlm doesn’t touch on the moral issues of such photojournalism (a glittering career built on the deaths and suffering of others; the competing ethical demands of chronicling an atrocity to let the world know and administering aid to desperate people and intruding on untouched cultures). Salgado’s architect wife gets less screen time than you might wish, given that she played a major role in his work and that he was by his own admission a largely absent father, to Juliano Ribeiro and a second son, diagnosed with Down’s Syndrome, whose interesting story (the family developed a non-verbal language with him) is never followed up on. But the power and persuasiveness of the documentary leave little room for complaint, and The Salt of the Earth stands as compelling proof that a picture is indeed worth a thousand words. debbie.stowe@business-review.ro

www.business-review.eu Business Review | July 2015

44 city

timisoara turns up the tempo Timisoara, in western Romania, has for three years now been staging JazzTM, a gamut of music and free outdoor shows, with exceptional lineups, both international and national. Behind the scenes is organizer Norbert tako who told BR how a young festival can become an international date for jazz lovers. ∫ tatiaNa LaZar

All that jazz

you have organized plai festival, an international world music and art festival which takes place at the banat village museum, since 2006. why also a jazz festival? Two years ago, we were contacted by the city hall to come up with a project that would include a central public square and jazz. At that point, the city hall was one of our sponsors for Plai Festival, but we didn’t actually work together so we were quite surprised by their offer. So we planned a jazz festival, but we also wanted to make it more open to other music genres in order to engage more people. And we did it – let’s take for example the Liv Warfield w/ Prince’s NPG Hornz concert which took place on July 4: they have a jazz base, but most of the songs are R&B, so the public was more familiar with the genre and interacted better. as a cultural manager, what is your view of the sponsorship offered by the national authorities, such as the ministry of culture or the government? For Plai Festival, we were lucky enough to benefit from some money given by the Ministry of Culture, but only for two editions. The Romanian Cultural Institute has also helped us with funding or material support over the years. JazzTM is fully sponsored from local funds, by the city hall. the local press has reported that the festival has a lower budget year after year. can you still maintain the same level of performance with less money? At its launch, the festival had a generous budget because at that point some private companies were involved as sponsors, as well as the County Council. What happened was that for the past two editions, the festival has had only RON 500,000 to cover organizational costs, the budget provided entirely by the city hall – which is constant. So we had to cut mostly the communication budget in order to maintain the same technical quality and also to bring the most famous jazz names to our local stage. who does the band selection for Jazztm and how? I do it, and then I send it to the city hall for approval. JazzTM has a specific format, meaning that the opening concert always has national flavor, preferably local, or from the western area; then a band that is conquering billboards;

and last, the headliners – the jazz legends. When it comes to selection, I listen to a lot of music, mostly online radio stations specialized in music genres. And when I enjoy a new song, I note down the band to research it when I’m in front of a computer. One of the most important aspects for me is live concerts aired online – this is how I can decide if the artists are suitable for our open-space festival or not, because the differences between open space, studio and live sessions are quite notable. I make these discoveries only about five-six times per year, and usually book such artists for the JazzTM middle concerts. what has been the most difficult thing about organizing this festival? Probably public perceptions the first

year, because the festival attracted some negative editorials in the local press. But after the ﬁrst concert, public opinion changed and everything was back to normal because they realized that everything was as it should be: no misused money or technical problems. Also, we made everything very transparent to avoid any wrongdoing – and we “conquered” the locals. do you think Jazztm is the most important music festival in the city? I believe it can be. We are only on our third edition, so we are quite young to become number one, but we are getting there because we love our job and we are constantly improving the event. Also, we are taking about a niche – jazz – so we can’t reach everyone. editorial@business-review.ro

On the first night of JazzTM, I misjudged the local public. At first, they were all sitting and listening, without any visible non-verbal communication. They needed a calypso beat from the legendary Marcus Miller to dance, feel and enjoy what was happening on the stage in the Victoriei Square. On the second day, the first surprise was delivered in the middle of the day, at 37 degrees C, at the rehearsal of Liv Warfield w/ Prince’s NPG Hornz and her band. People were passing by and stopping in the heat just to enjoy the amazing show that was happening on stage, with no notice. In the evening, the audience members were beside themselves, from the first concert, given by Ana Cristina Leonte, to the last one, where 13,000 people, from children to the elderly, were dancing on air to the beats of Liv Warfield w/ Prince’s NPG Hornz. The last day of the festival started with a well-known Timisoara-based jazz group, the Exit Oz, followed by incredible electric jazz from Guillaume Perret, an innovative fusion of contemporary jazz, funky grooves and howling heavy metal. The pinnacle of the festival, the fabulous dianne reeves, was beyond expectations. The show started without her, making us wonder where the greatest living jazz singer was. Control, emotion, intonation, interpretation, improvisation, phrasing, range, soul – everything was there, in Timisoara’s public square, right in front of us, in the person of Reeves, when she finally appeared on stage.

www.business-review.eu Business Review | July 2015

city 45

moving target: getting fit for business Club Moving entered on the local market in 2010, and now has fitness centers in Bucharest, Cluj, Iasi, Ploiesti, Bacau and Craiova, with more than 12.000 active members around the country. BR talked to general manager delia iliasa to find out why she started out in this field and how the firm helps customers achieve their goals. swimming is the most accessible and beneﬁcial; others give this credit to jogging. I say that you should set a goal, achieve it and then celebrate. After that, repeat.

How did you get started in fitness? It was one of those moments in life when you start something because it looks fun and you want to take it slowly, but then you discover it was meant to be. The funny thing is that it proved to be the best decision of my life and today fitness takes up more than 50 percent of my time. what have been some of the biggest challenges over the years? The first day at work in every new position, running in the Bucharest SemiMarathon with my team and motherhood. I take every challenge seriously and I celebrate every achievement. How do you create the programs for the club? By brainstorming. We are a team, so I consult my managers all the time. They provide essential information and this way I feel that I am in touch with all our customers. We also follow trends, and for this we have a sports department

when trying to lose weight or get in shape, what goals do you set? First thing ﬁrst, I always set a goal. I take little steps because I know frustration is the cause of failure. What I do is set quantitative goals: run 5km, work out four times a week. I almost never work to a schedule it’s all about the way I feel.

that I feel is second to none in this industry. do you have any standout clients in terms of transformation and/or lifestyle change? I am proud to say we do. We have people who come and ask for their membership cards to be replaced because their current appearance no longer re-

sembles the initial photo! But I am even more proud to see the majority of our customers leaving our clubs with a smile – this is the main transformation that we aim for: putting a smile of satisfaction on people’s faces. is there one exercise that can help most people? All exercise impacts our lives. Some say

why do you think so many people struggle to lose weight? It is known that our lives are impacted by what we eat and by our habits. Unfortunately, as we see when we look around, habits are not always healthy. That’s why it’s a struggle: the habit loop. Change the routine and do something healthy in order to be happy. editorial@business-review.ro

www.business-review.eu Business Review | July 2015

46 city

calendar ∫ tatiaNa LaZar padina fest bucegi mountains, dambovita county July 23-26

If you are tired of the noise and bustle of the city, head up to 1,500 feet to Padina Fest, for camping and forest fun. Adrenaline junkies can take part in rockclimbing, rappelling, a Tyrolean traverse, weapons history workshops and competitions with prizes. If your goal is to relax, you can ﬁnd Zen terraces with hammocks, jute bags and shade. In the evening culture vultures can enjoy theater. On top of that there is a program of concerts by Romanian and international artists such as Alternosfera, Luna Amara, Robin and the Backstabbers, Firma, Niste Baieti, Suie Paparude and Firkin, a Hungarian outﬁt playing Irish rhythms. A full subscription costs RON 50, while the last day of the festival is free of charge.

Untold festival cluj-Napoca July 30-august 2

Described by organizers as “more than just a festival, more than just music”, this year’s event tells the Untold story of Romanian fairytales. Cluj-Napoca’s main areas will be transformed into

mythical realms: The River, The Mountain, The Citadel, The Forest and The Pool. Each will have its own story, and will be under the protection of a fantasy character, in the form of Armin van Buuren, Avicii, David Guetta (in picture), ATB, Duke Dumont, Fedde Le Grand,

Tom Odell and many others. A full pass costs from RON 310, while one-day tickets start at RON 138.

rasnov Historical film festival rasnov, brasov county July 31-august 9 Pope John Paul II, Hiroshima, Armenian Genocide and Nicolae Ceausescu.

artmania sibiu July 31-august 1 ARTmania Festival attracts thousands of tourists to Sibiu every year, constantly developing and adapting its concept. On its tenth anniversary, three international acts will be playing in the Large Square on both evenings. Apocalyptica, Anathema, Clan of Xymox and Saturnus are already confirmed. Access is free of charge. This year’s festival will bring documentaries and fiction films, historical debates

and witness testimonies, interviews with actors and directors, concerts and book presentations to Rasnov, both to the local cinema and the Rasnov Citadel. The themes are Secession vs. Union,

Two-day passes will be available on www.easytickets.ro and in Orange shops (Eventim network), priced at RON 239.

anonimul film festival sfantu Gheorghe, danube delta august 17-23

summer well domeniul stirbey, ilfov county august 8-9

Newcomers will join long-time Summer Well favorites, with Foals, La Roux (in picture), The Maccabees, Kwabs, Circa Waves, Kasabian, The Wombats, Jungle, Foxes and Dan Croll all conﬁrmed. The two days of music will also feature art performances and new technologies.

Anonimul International Film Festival returns to Sfantu Gheorghe at the Danube Delta. It will open with a screening of The Lobster (in picture), directed by Yorgos Lanthimos, which received the Jury’s Award at Cannes 2015. Over 400 short movies from 30 countries have been submitted for the competition, which will award the best foreign and best Romanian shorts. editorial@business-review.ro