ROMANIA’S STAR SECTORS IN 2020

With a very dynamic global business environment, the Romanian economy is already adjusting to the new economic context, as growth settled to around 4 percent in 2019 from 4.4 percent in 2018 and 7.1 percent in 2017. With local elections coming soon, 2020 will be a challenging year for businesses. Still, there are some sectors which have registered robust development lately and thus have the potential to shine this year. Let’s meet the stars of the local economy in 2020!

By Aurel Constantin, Sorin Melenciuc, Anda Sebesi, Claudiu Vrinceanu

Real estate sector could exceed EUR 1 billion this year

2020 is expected to be the best year in the post-crisis cycle for the real estate investment market in Romania, after total investments worth EUR 644 million in 2019. Deals worth at least EUR 600 million could be finalised this year in the office segment alone, which will be the star of the real estate investment market, according to the annual report released by Colliers International.

Colliers International data.

“The development of office buildings has not yet reached the maximum of its potential; there are many companies which are continuously growing their teams, which is why they’ve become interested in finding office spaces near residential areas to ensure easier transit for employees from their workplaces to their homes. In addition, developers have understood that in order to lease their projects have to include both functional spaces for businesses as well as areas where employees can relax and spend time. Real estate now means more than developing good looking buildings and using new technologies; it’s also about creating communities,” Panait adds. Retail transactions represented nearly 24 percent of total volumes in 2019, according to the same data. The largest transaction, worth EUR 113 million, was made by MAS Real Estate for 8 retail projects it had developed together with Prime Kapital. Another important deal was closed by Indotek Group, which purchased Promenada Targu Mures for an estimated EUR 40 million.

The same source says that the industrial sector had a more modest performance in 2019, accounting for less than 10 percent of the preliminary figures, with CTP’s purchase of A1 Bucharest Park for around EUR 40 million as the year’s biggest transaction. In fact, the local industrial and logistics spaces market had the highest yields in the region, of up to 8.25 percent, compared to 6.5 percent in Warsaw, 7 percent in Budapest or 5.25 percent in Prague.

“We have a dynamic real estate market in which companies will continue to focus on office buildings in order to find the perfect place for thei employees, near public transportation, while employees will be searching for residential areas that offer them not just a functional space to live in but also the possibility to spend quality time in the surrounding areas,” concludes Panait. W ith some of the highest investment yields in Europe and given the volume of over half a billion euros’ worth of transactions either secured or in advanced negotiation, the volume of real estate investments is expected to exceed EUR 1 billion in 2020, Colliers International consultants predict. Going forward, interest migrating from pure class A office buildings to those with a value-added angle or reconversions are trends to monitor in 2020. The hotel sector is expected to be active as well, supported by international brands that want to expand at a robust pace for several years to come, based on current plans.

At Central and Eastern Europe (CEE) level, the Romanian market last year attracted almost 7 percent of the total investment volume of about EUR 13.4 billion. Poland remained the leader in the region, with investment volumes accounting for 55 percent of the overall CEE6 total, at a record-breaking figure of about EUR 7.4 billion.

Speaking about how Romania compares with other countries in the region, Antoniu Panait, Managing Partner at Vastint Romania, says: “Romania has the potential to become a regional leader in terms of the real estate industry as well as multiple other sectors, as we have all seen the great number of companies that have relocated their headquarters to our country or have started a new branch here, along with startups that have grown extremely quickly. Therefore, the real estate industry will continue to evolve and explore its true potential if business is done well,” says Panait.

Last year, the office market attracted more than 60 percent of real estate investments, with Bucharest and Cluj-Napoca being the most dynamic cities. The year’s biggest deal was the sale of The Office by NEPI Rockcastle and local developer Ovidiu Sandor to Romanianowned DIY chain Dedeman, for roughly EUR 130 mln, according to By Anda Sebesi

New legislation and economic growth to boost revenues of local private healthcare providers

The private healthcare sector is already flourishing in Romania, but new regulations and coronavirus pandemic fears could boost its revenues and earnings in 2020.

By Sorin Melenciuc

PRIVATE HEALTHCARE-FRIENDLY NEW REGULATIONS This year, Romania started a major reform of its much-criticised health system, favouring private hospitals, which are now allowed to treat patients through the national curative healthcare programmes along with public hospitals. These new regulations could boost activity in private hospitals as the predictable outcomes of the new law will be a transfer of some patients from public to private hospitals.

At the same time, emergency procedures in private hospitals will now be reimbursed at a fair cost by the Health Ministry, a measure that can also bring more patients and additional revenues to private healthcare providers across the country. In terms of business, large private healthcare services providers such as MedLife, Regina Maria, Sanador, Gral Medical, Monza, Medsana or Medicover will be among the major beneficiaries of the new regulations.

Romania currently has more than 100 private hospitals and clinics and new projects are being developed as the new reimbursement regulations favour treatments in local private hospitals, which can attract the patients who have previously preferred to pursue complex treatments abroad.

CORONAVIRUS EFFECT Another factor that could trigger higher demand for private healthcare services in Romania is the new coronavirus, known technically as SARS-CoV-2, which causes the COVID-19 disease.The new virus has been spreading around the world and can cause a respiratory illness that can be severe, and experts say that it is only a matter of time before the new epidemic reaches Romania.

In fact, many experts warn that COVID-19 is here to stay. The emerging consensus among American epidemiologists is that the most likely outcome of this outbreak is a new seasonal disease - an “endemic” coronavirus. This means that “cold and flu season” could become “cold, flu and COVID-19 season.” Harvard epidemiology professor Marc Lipsitch predicts that within the coming year, some 40 to 70 percent of people around the world will be infected with the new virus. AGEING POPULATION Another boost for private healthcare businesses will certainly be related to Romania’s rapidly ageing population. According to a recent ING report, Belgium and Romania’s potential for elderly care and support, projected until 2030, will be the highest in Europe. “When it comes to paying for care and household support, it is most common that elderly people in Romania, Italy, Spain and Poland pay their care and household support largely by themselves,” the report says.

Home support services, including healthcare, can be essential for an independent elderly life. Some private providers are already investing in this type of healthcare services and the market will certainly grow quickly during the next decade.

HEALTH-RELATED TECH BUSINESSES But the boost in private healthcare businesses expected this year is not contained to private hospitals in Romania. During the last few years, tech startups and IT firms have developed many healthrelated businesses and apps. Cluj-based IT developer Life is Hard has recently launched a medical second-opinion app called Doxtar, allowing patients to get virtual consultations from real doctors. Another example is SanoPass, a Romanian startup founded in 2019, which addresses companies and issues preventive medical subscriptions offered by employers as benefits for employees at over 500 independent clinics and medical offices.

“In 2020 we’re seeing access to medical services being democratised, and independent medical offices are also growing due to innovations and technological platforms. Subscriber employees can make appointments in any partner medical clinics, having full freedom to choose depending on proximity or personal preferences,” SanoPass representatives told Business Review. According to the company, a subscription to the SanoPass platform provides software for consultations or investigations, regardless of the medical specialty, in a maximum of 48 hours. Through the app, employees can talk to a qualified nurse and then to a specialist doctor who can solve the medical problem, offering a diagnosis and a treatment plan.

Entertainment & wellness facilities in high demand around Romania’s big cities

Years of double-digit wage growth and poor infrastructure have stimulated the growth of new businesses in rapidly-developing Romania, and demand for entertainment and wellness facilities is booming, especially in the proximity of large urban areas.

4,000 visitors at a time. It is split into three zones: The Palms (for relaxation), Elysium (wellness) and Galaxy (the family area that includes a playground). The investment has already proven successful. Within less than a year from its official opening, Therme Bucharest expanded its Galaxy area by 4,000 sqm, following an investment of EUR 10 million. The expansion was carried out earlier than initially planned due to the unexpected success the centre had right after opening, according to Therme representatives. “Romanians were very open to the new relaxation, wellness and fun opportunities at Therme Bucharest. Expansion was a natural step due to our visitors in the Galaxy area,” said Stelian Iacob, general manager of Therme Bucharest. According to the company, three million Romanians and one million foreign tourists have visited Therme Bucharest in the four years since the centre opened. Other tourism investments close to the capital city have proven fruitful as well, as Bucharest inhabitants have had increasing difficulty in visiting resorts like Comana (30 km south of Bucharest) due to heavy traffic and insufficient parking capacity. HUGE POTENTIAL This reality suggests that there is a huge potential for investment in quality entertainment, relaxation, health and wellness facilities located in or near large urban areas in Romania. According to a recent A.T. Kearney report, the Romanian health & fitness market will reach a total value of EUR 360–380 million by 2023, up 45–55 percent versus 2018. Another connected market is the spa segment, which is still at a low level in Romania. There are a few dozen spa centres across the country, especially in hotels, and some day spa centers. In 2017, Romania’s spa market figure was around EUR 24 million, of which EUR 15.6 million in spa access (pool areas, saunas and other spa facilities) and 8.8 million in spa treatments. I f you’re thinking of visiting Therme, one of the biggest thermal water wellness centres in Europe, located some 20 kilometres north of Bucharest, you’ll have to be prepared to wait in a long queue to get in, as thousands of people living in or around the capital city choose to spend their time here on any given weekend. The same phenomenon can be observed every weekend for similar attractions near other big cities such as Cluj or Timisoara, where large and expanding middle classes have benefited from the recent economic growth and have rapidly gained higher purchasing power over the past few years. TRAVEL ORDEAL One of the major causes of this situation is poor infrastructure, generating difficulties when it comes to moving around the country. Visiting popular tourist attractions such as the mountain resorts on Valea Prahovei has become an awful ordeal for Romanians, as a 120-km trip from Bucharest to Sinaia takes five or six hours on average and requires a lot of patience. This problem has boosted one particular type of tourism in Romania: short-distance tourism, based on the proverb “If the mountain won’t come to Muhammad, then Muhammad must go to the mountain”.

Some tourism entrepreneurs have speculated this reality and have moved their investments closer to clients, inside or around big cities. Someone living in Bucharest can now visit several local attractions without doing much travelling, but the long queues prove that there is already a need for more such facilities. EASY MONEY Austrian group A-HEAT has invested around EUR 30 million in Therme Bucharest, the wellness center mentioned above, which opened in January 2016. The facility has an outdoor area of over 250,000 sqm and an indoor area of 30,000 sqm, and it can host By Sorin Melenciuc

New investments in HoReCa market this year

Automation, an increasing role for technology, a lack of human resources, development of the sector through new investments and a growing delivery segment are among the most important trends forecast by Romanian managers and entrepreneurs as well as specialists of the Hospitality Culture Institute, an independent research, training, and consultancy institute studying the HoReCa market.

By Claudiu Vrinceanu

TREND: AUTOMATION 2020 may not have a single dominating trend, but it will set some directions that will revolutionise the hospitality industry. In terms of technology, automation is becoming increasingly popular in the industry, from the implementation of CRM and chatbots in companies that operate locations to online platforms and e-markets for HoReCa customers or suppliers, says Cristian Cristea, Business Development Director HoReCa Macromex. The role of online communities and personalised experiences will also increase: each client will want to share their experience interacting with a relevant brand that resonates with them.

Sustainability - a concept that until recently had only been embraced by large corporations - is gaining ground in the hospitality industry. According to the Hospitality Culture Institute, we will talk and act more and more on topics like the elimination of plastic or the reduction of waste and pollution.

TEAMWORK AND PROFESSIONAL NETWORKING: PRIORITIES FOR HORECA SPECIALISTS Teamwork on joint projects in the industry is among the most important trends of the moment. Isolating yourself in individualism in 2020 is no longer a productive solution. “Due to the acute lack of human resources, professional networking is no longer a nuisance, and it becomes a common source of resources, essential in achieving the objectives of any professional in the industry,” says Laurentiu Mata, regional director of the National Association of Cooks and Confectioners in Tourism (ANBCT).

2020 - A YEAR OF INVESTMENTS If we wanted to address the most significant trend on the HoReCa market in 2020, we could talk about development.

This year will bring a series of new investments, in new hotels (at least 40 units are in the pipeline for 2020 and 2021), in restaurants or event centres, leisure centres or spa areas, according to FIHR president Calin Ilie. This development comes after years of increased performance in tourism, as a result of good tourism taxation, and represents consistent investments made by both existing investors (who are expanding or upgrading their businesses), as well as some new investors coming from other sectors to test the HoReCa market.

As for the stage of the hotel industry in 2020, it is like a crusade: investors are constantly conquering buildings and turning them into hotels and resorts. “Romania is slowly becoming an interesting European destination, especially because we have the unique advantage of mixing the natural ecosystem with the latest technology. Compared to other countries in Europe, we and the Bulgarians have the lowest prices and have a huge potential all year round. Demand exceeds supply in high seasons and we have different high seasons depending on the area. There are still many resorts in pretty bad shape, but private investments are on their way,” says Octavian Moldovan, general manager at Suter Palace Heritage Boutique Hotel.

GROWING DELIVERY MARKET “If I were to think of a booming trend in 2020, I think it will be in the delivery area, as we live in an age when time has become extremely limited and we can no longer take the classic long coffee or lunch breaks during the day,” says Vasi Andreica, the founder of TED’S Coffee. This industry will explode, with existing platforms targeting other product groups besides those currently being delivered, and new players will appear in the field.

Fintech companies on rapid growth path

The fintech industry is one of the most disruptive sectors and it will change the way consumers use money and banks. The services provided by fintechs are mostly new and yet to be regulated, and their synergy with banks will see the sector thriving during the coming years.

ing round. “Our mission is to build a global financial platform - a single application through which our users can manage their entire financial lives. The next step for us is launching banking operations in Europe, increasing the number of users who use the app daily and achieving profitability,” said Nik Storonsky, the founder and CEO of Revolut.

This year Romanians will also have access to Monese and Paysera, two fintechs that will cover both personal finance as well as corporate needs. They will join a scene that already includes about 40 fintechs, with companies like Pago, beez, mobilPay or Volt having established a presence in Romania.

Investments in Romanian Artificial Intelligence (AI) start-ups will reach EUR 50 million in 2025, according to estimates by management consulting company Horvath & Partners. The level of investments in AI start-ups in the last quarter of 2019 placed Romania near the top of the ranking of countries of Eastern Europe, behind Hungary, Russia, and Poland, but ahead of the Czech Republic, Slovenia or Slovakia. In the last three months of last year, investments in AI start-ups in Romania amounted to around EUR 20 million. Most of the investments went into two fintech start-ups: FintechOS and TypingDNA.

TypingDNA, a startup developing online security solutions based on behavioral biometrics, founded in Oradea, received a funding of USD 7 million, while FintechOS, a Romanian startup doing automated financial technology, received EUR 12.4 million. “We think that the period of extraordinary effervescence on the digitization segment, which we are currently going through, will intensify in the next decade. GDP growth generated by AI and Machine Learning in Europe will amount to EUR 1.5-2 trillion over the next 10 years,” said Kurt Weber, the general manager of Horvath & Partners Romania. It is safe to say that the best is yet to come for the fintech industry. T he last decade has seen a surge in the number of fintech startups, using technology to make it easier for people to make payments, transfer money or exchange foreign currencies. These innovative platforms have not only eaten away at the monopoly of banks and other established financial players, but they’ve also allowed customers to take greater control of their finances.

The global fintech personal finance industry is expected to be worth USD 1.5 trillion this year, according to data gathered by LearnBonds.com, growing by a massive 45.1 percent year-on-year. This bullish trend is set to continue over the coming years, with personal finance transactions set to come in at almost USD 2.7 trillion by 2023.

In 2017, personal fintech transactions hit USD 291 billion in value, according to Statista data. Since then, the market value has had a fivefold growth, jumping to USD 1.5 trillion globally.

The number of users in this sector of the fintech market is forecast to hit 79 million this year, growing by 49.5 percent compared to 2019. Over the next three years, the number of people using fintech personal transactions is expected to almost double and jump to 147 million worldwide.

Investing through online platforms, known as robo-advisors, is the largest part of this sector and is expected to top USD 2.5 trillion giving it a 94 percent share of the fintech personal finance market by 2023. The robo-advisory market grew out of the 2008 financial crisis as small investors looked for wealth managers who charged lower fees, amid historically low interest rates on savings. ROMANIA AMONG FINTECH AFICIONADOS In Romania, the most popular fintech is Revolut, a platform that has reached almost 1 million customers in our country. Recently, the fintech was valued at USD 5.5 billion after a USD 500 million financBy Aurel Constantin

Investors eyeing local software industry

For the software industry, 2020 means an increase in revenues generated by IT companies, the growth of the startup ecosystem, and the expansion of Romanian companies abroad. At the same time, software robots and automation will continue to appear in the business environment at a rapid pace, we will see new players entering the market and, at the same time, uncertainty about the tax facilities granted to employees in the IT industry will continue.

continue their internationalisation process: Connections Consult, which specialises in automation, software development and IT outsourcing, will continue its expansion into international markets (Middle East, South-East), DocProcess, a company that has attracted Morphosis Capital among its shareholders, is developing on the French market, while Druid, the startup that sells virtual assistants and was launched by the founder of Totalsoft, plans to open an office in the US. According to ANIS, IT services that go abroad represent 19 percent of Romania’s total exports in 2019, up 17 percent from 2018 and 15 percent from 2017. Another general trend for 2020 will be the fact that software robots and automation will continue to appear in the business environment at a rapid pace. Software robots will not succeed in replacing people, but more and more companies are investing in this area. A striking example, of course, is UiPath, but we are seeing more Romanian companies developing such solutions, such as MissionCritical, a local startup that has developed its own Robotic Process Automation (RPA) platform for clients in the hotel industry, startup developing reusable software robots.

The software industry will remain interesting for investors who are active in the mergers and acquisitions market. “The technology sector has expanded and attracted significant investors over the last ten years, and this upward trend will continue in the future. Romania is an attractive market for the IT industry, due to the high number of software service providers and the growing number of accredited IT specialists,” say KPMG experts. Along with health and energy, technology is considered to be one of the most attractive sectors for investors in the upcoming period. T he software and services industry will grow steadily in 2020, in terms of both revenue and number of employees, despite the fiscal and political unpredictability that dominates the local landscape. Overall, the local software market will grow by about 10 percent in 2020 and reach 6.6 billion euros. However, strictly based on the evolution of Romanian IT companies, estimates show a continued stagnation of their incomes.

From the fiscal point of view, we will see many discussions about the tax facilities in the IT field, including the idea of eliminating them. In recent years, fiscal facilities have stimulated foreign investments and have kept the Romanian IT industry competitive, in a race for investments with other countries that offer software developers zero income tax, such as Ukraine, Poland or Belarus. The deficit of IT workforce at the EU level is so great that an elimination of fiscal facilities could result in a massive reduction of specialists in the country, so a major economic impact on inbound investments (FDI).

In order for this sector to maintain the same growth rate, IT companies recommend continued public and private investments and initiatives in strategic areas such as education and innovation, aimed at supporting the medium and long term development of local software and services industry.

As an important trend in 2020, we will see the organic growth of local companies in a constantly changing global market, which brings both strategic and operational challenges. Entering new markets involves challenges related to cultural differences, but also to the speed of absorption of the progress generated by technology companies. Just a few examples of software companies that will By Claudiu Vrinceanu

Green Deal and Black Sea gas are 2020’s hot topics

The Romanian energy sector faces two major challenges in 2020: Black Sea natural gas exploitation and the European Green Deal, which among other things means cutting back on the use of coal in electricity production.

GREEN DEAL AND COAL The European Union has proposed a Green Deal that would reduce carbon dioxide emissions by 55 percent by 2030 and get to net zero emissions by 2050.

For Romania, the Green Deal means heavily reducing its use of coal to produce electric power.

Today, about 25 percent of Romania’s electricity comes from coal-powered plants. It is quite a good number considering that less than 10 years ago coal accounted for 45-50 percent of all electricity production.

To lower our carbon dioxide (CO2) emissions, we should replace coal plants with natural gas units, which are much cleaner. In order to reduce CO2 emissions by 45 percent by 2026, we should replace 1,350 MW of coal-produced power with 1,450 MW in natural gas production along with a few solar parks.

“We will ensure that by 2030, we’ll have a 50 percent reduction in CO2 emissions from coal electricity generation,” Popescu stated. For that to happen, we need the natural gas that lies at the bottom of the Black Sea.

The gas will be needed for household heating purposes. Today, only 35 percent of Romanian households are connected to a gas distribution line, while in countries like Hungary this share stands at 90 percent.

Romania should negotiate for a financing line that reaches a total of EUR 10 billion for the coming years for gas distribution, replacing coal power plants and enhancing renewable power plants.

Nothing has been done so far, meaning there is no long-term plan for the energy industry that could actually get us this money from the European Union. There is still time, but negotiations are taking place in Brussels with all the countries in the EU. R omania sits on a natural gas reserve estimated at 270 billion cubic meters, located in the waters of the Black Sea. But taking them out is no easy feat, especially when legislative changes put the companies involved at a disadvantage. ExxonMobil, one of the most experienced companies in the world on offshore exploitation, has decided to quit the consortium that also included OMV Petrom for the Neptun deep water sector, estimated to have between 42 and 84 billion cubic meters of natural gas, the equivalent of Romania’s consumption for 4 to 7 years.

Exxon was not happy with Government Ordinance 114/2018, and even though it has invested around USD 700 million in the project, it said that it would leave if the law isn’t changed. The OUG caps gas prices and sets a 2 percent tax on revenues, meaning the private companies’ profits would be heavily reduced. The company’s decision was also helped by the discovery of natural gas reserves in Cyprus, as it may focus on that exploitation instead.

Exxon’s possible departure doesn’t mean Romania should stop extracting gas from the Black Sea. “If Exxon wants to leave, I still want Romania to be part of the consortium,” says Virgil Popescu, the Economy, Energy and Business Environment minister. “Romgaz’s Board of Directors has approved the company’s involvement in the Neptun project and negotiations are underway.”

But a legislative change is still necessary for gas exploitations, and it can only be passed by the Parliament based on the will of the main political parties, which are not very interested in this law ahead of two major election rounds.

Until then, the minister said that the first natural gas extracted from the Black Sea would get to shore in 2021-2022, coming from the Midia perimeter. By Aurel Constantin

5G network awaiting auction in start position

5G networks are set to expand rapidly in 2020, at least in North America, Asia, and western Europe. We will find out soon whether Romania can keep up with the rest of the world. Apart from the 5G spectrum frequencies auction, Romanian authorities must still make a decision around Huawei’s involvement.

the EU member states’ examples and allow Huawei to install 5G transmitters - not as the sole producer, but together with companies like Ericsson, Nokia or Samsung. Romania is still one the first countries to deploy commercial 5G connections, but the network is far from being built.

Vodafone, Orange, Digi, and Telekom are waiting for new frequencies and the related auction. Once they learn how much the license for using the frequencies will cost, the operators will be able to calculate the investments needed for 5G. The auction will have to be held in the first half of this year, regardless of the political instability. 5G TO ACCELERATE IN COMING YEARS By 2023, 45 percent of all internet-connected devices will have a mobile connection, while 55 percent will be connected through cable or Wi-Fi, according to the Cisco Visual Networking Index report. 5G connections will account for 10.6 percent of all mobile connections, compared to 0 percent in 2018.

The average speed of a 5G connection in 2023 will be 575 megabytes per second (Mbps), 13 times higher than today’s average. We can already see download speeds above 575 Mbps in Romania, in areas where 5G has been deployed - some parts of Bucharest, Cluj or Brasov. “Our research shows continued growth in the number of internet users, devices, and connections and a greater pressure on networks that we had imagined,” said Roland Acra, senior vice president and chief technology officer at Cisco.

But the main impact should be on the business side, where the network will allow connections on a massive scale, transforming the way we live and work. Autonomous vehicles, automation in industries, and smart factories will be able to transform manufacturing, making them more efficient. Machine-to-machine connections (M2M), which will enable most IoT apps, will account for 50 percent or 14.7 billion of all devices and global connections. 5 G networks should roll out this year, but there are clouds all over the industry. While unexpected problems like the coronavirus outbreak have had an impact, there are also security issues regarding equipment producers’ ownership rights, especially for Huawei and ZTE, the Chinese producers of 5G transmitters. Last but not least, everybody is waiting for the European Union’s auctions for 5G frequencies, where the guidelines from the European Commission are still pending.

The European Commission has laid out its recommendations for member states regarding possible security risks coming from the new technology. The objectives of the 5G “toolbox” are to identify a common set of measures that can mitigate the main cybersecurity risks and provide guidance at both the national and Union level. Among the risks identified are: dependency on any single supplier or lack of diversity on a nation-wide basis, state interference through the 5G supply chain and exploitation of 5G networks by organised crime groups targeting end-users.

But the EC has not named any particular companies that should not be allowed to participate in the construction of the networks. Therefore, each country must decide whether to ban Chinese makers. So far, there are no countries stopping Huawei or ZTE from taking part of their 5G networks. Huawei has already signed contracts in the United Kingdom, South Korea, France, Switzerland, and Finland. Austria, Belgium, France, Germany, Hungary, Italy, and Poland have already decided that Huawei could play a role in the making of their 5G networks, but with some limitations; for example, Huawei will not be allowed to provide equipment in sensitive sectors in France, such as military areas. ROMANIA IS LAGGING BEHIND Our country has not yet decided whether any producers would be banned from participating in the process. We will most likely follow By Aurel Constantin

Emerging technologies to change the world as we know it

Digitalization is already taking place in our lives and changing the way we do business, but new technologies that are still to come, like 5G connectivity, Internet of Things and Artificial Intelligence, will have a significant impact on our lives. Business Review talked to Mihnea Radulescu, Enterprise Business Unit director at Vodafone and UPC Romania, to find out more about the impact technology will have in the future.

By Aurel Constantin

The digitalization of the economy is the most important

transformation process happening today. Which new technologies will have the most signifi

cant impact on businesses and the economy in general? Digitalization will indeed have a significant impact on our day-today lives and on our economy in general. There are several emerging technologies that I believe will be game changers. One that we see claiming strong ground already is RPA – robotic process automation – which takes over repetitive tasks from humans and transfers them to so-called robots. The second is IoT (Internet of Things), which aims to put together an ecosystem of devices and intelligent platforms to provide insightful information and trigger specific actions. Combined with RPA for example, it will be a powerful tool. Third is AI (Artificial Intelligence). We have seen some extremely interesting demonstrations of its power, however the road ahead is still long, especially if we’re talking about generalised AI, which is unlikely to properly develop within the next ten years.

What is the role of the communications industry in this process?

How important is connectivity within digitalization? Our industry was the foundation of the early stages of digitalization. We should keep in mind that there can be no digitalization without devices and processes and programmes communicating with each other, which is basically what we now call the internet. We have developed and changed our view on connectivity and we experience it in terms of availability and speed. Our future role is not just to be a partner for digitalization companies, but to be one of them. In other words, the role of the telecommunications industry will continue to be pivotal in the digitalization of our world. How can new technologies help businesses grow? New technologies support growth acceleration for companies by making them more efficient (cost cutting) or exploring new and innovative ways to enrich customer experience (revenue growth). Some of our customers are really playing in the top league in terms of digitalization, monitoring and triggering different actions or processes in their daily operations by using IoT, for example. I can give you some relevant examples: Mega Image, a clear IoT case in retail, and OMV, a highly complex implementation of the latest technologies in an E2E oil and gas company.

What are Vodafone’s plans for the future? Ten years ago companies were talking about connecting people to mobility, to technology. Today we are talking about ways to connect assets, cars, people, “things” to the internet. One of the main pillars of our strategy is to connect a significant number of “things” to the internet: fixed or mobile assets that analyse data in real time, solutions that talk to each other, sending and receiving data as well as requests in real time. IoT now plays a key role in automation, it is a differentiator in customer experience, but more importantly, it has become an advantage in a competitive market.Vodafone Romania provides companies with Drive Net (in-car connectivity), as well as Fleet Management Systems to reduce fuel costs. Moreover, Vodafone Romania has launched the first NarrowBand IoT network with country-wide coverage in South-Eastern Europe. This launch consolidates our leadership position on the IoT market solutions and will offer our enterprise customers the chance to develop and implement a wide range of solutions and applications to improve their business processes.

Online sales outperform stationary retail in sports goods market

The consumer market is growing in Romania as the appetite for new stuff is still high. The same can be said about the sports goods market, with people looking to build healthier and more active lifestyles. Business Review talked to Catalin Pozdarie, general manager at Hervis Sports & Fashion Romania, to see how the sports goods market is developing and how online sales are changing the business.

By Aurel Constantin

The Romanian consumer market is growing, both in terms of purchasing power

as well as interest for high quality items. How is this seen in the sports goods market? Has the average price of a pair of

running shoes, for example, increased? The Romanian sports goods market is on an upward trend but, unfortunately, if we compare it to other countries in Europe, the percentage of people practicing sports at least once a week remains the lowest, below 10 percent, even though Romanians have begun to understand the importance of exercising in maintaining a healthy lifestyle and the benefits of practicing it from an early age. In Northern countries, about 80 percent of the population over 15 years old engages in physical activity at least once a week. This means that there is still a lot of potential in Romania. The average price for a pair of shoes has seen an insignificant growth, below 1 percent. But the number of those who are starting to practice sports has tended to increase. This aspect, correlated with the expanded offer and a correct mix of products, along many other factors, have influenced our sales growth. 2019 was our best year, with a growth of 21 percent.

Online retail has flourished in recent

When we purchase sports goods, especially shoes, trying them on is very important.

Do customers prefer to come to the store to try on items or are they willing to order several products online and then return

years. How is this generally seen on the sports goods market? Online retail is currently experiencing the highest growth rate. To be successful as a store, we need to be where our customers are. And they are everywhere: they come to the store to see the products and order online, they do research about the products online and then buy from the store or they simply

see products online or in the store and buy them straight away. It is not a recipe, but those who are the quickest to adapt to market trends are the winners. Online sales recorded a 60 percent increase last year. Such growth is

only possible in the online area.

what doesn’t fit? For customers, it is equally important to try on articles as it is to research products online. Our customers do not tend to order and return later, as they might do in other fields like fashion, for example. In Austria and Germany, customers order several sizes of the same product and return those that don’t fit. But this is not a common phenomenon in Romania, especially because it involves a much greater financial power.

How does the activity of a classic sports goods store change as a result of online sales? First of all, the mentality within the company has to adapt to the change generated by online sales. The same customer can either visit the store or order products online. Their buying experience must be kept at the same high-quality standards. Store employees must have online sales skills (“Digitaler Verkeufer”, as they say in German) to find products that are in stock or suggest adjacent products on any device, like a smartphone or a tablet.

Is the online sales volume relevant to Hervis or is it more of a marketing activity? If we compared it to stationary stores, at the moment, the online store has the best performance. The sales volume is relevant and it is the only channel that can record such large increases from one year to the next.

How export companies help

the Romanian economy

Exporting companies are important for the real economy and the banking sector, but the health of these companies that are exposed to foreign economies must be looked after in case of economic deterioration.

By Claudiu Vrinceanu

mania, businesses involved in foreign trade reported decreases in their profit margins and, to a greater extent than the average of respondents, indicated that they felt labour costs, credit costs and other costs were increasing.

The results also indicated that importing companies considered competition to be a pressing problem to a greater extent than export companies did.

The automotive sector is dependent upon the development of transport infrastructure

Economic activity by Romanian companies carrying out foreign commercial transactions with goods has grown in the last year, despite an international macroeconomic framework marked by commercial tensions. The sectors that contributed the most to the favourable evolution of foreign trade were manufacturing (82 percent of exports and 54 percent of imports) and trade (10.6 percent of exports and 38.5 percent of imports), according to the National Bank of Romania (BNR)’s latest Financial Stability Report.

The main players of the manufacturing industry that are involved in foreign trade, such as the automotive sector, are dependent upon the development of transport infrastructure and the provision of specialised workforce, which highlights the importance of creating a proper environment for business development. The software industry is another important sector in foreign trade, and this area’s focus on the human factor and lower dependence on infrastructure may indicate a significant potential. Based on the incorporated technological level, between September 2018 and June 2019, medium-high-tech products accounted for 49 percent of exports while high-tech products represented 6.6 percent, based on BNR figures.

2,700 NET EXPORTING COMPANIES Romania’s external balance is dependent on a small number of companies, which together hold a share of less than 1 percent in the total number of companies in the country. In mid-2019, there were 2,700 net exporting companies operating in the economy, while the number of net importing companies was 5,100.

OUTLOOK FOR EXPORTING COMPANIES According to a BNR Survey on access to finance for non-financial companies in RoFACTORS BEHIND THE TRADE DEFICIT An important source of the trade deficit is the trade of agri-food products. The situation is based on the (largely structural) difficulties that agriculture and the local food industry face in covering the visible consumption gap of recent years.

Banca Transilvania (BT) estimates that between 2020 and 2022 there will be a mitigation of the gap between Romanian imports and exports as a result of internal economic policies and a depreciation of the leu.

“In BT’s central macroeconomic scenario, we expect to mitigate the gap between the annual paces of exports and total imports (of goods and services) between 2020-2022 due to the rebalancing of internal economic policy (in particular through fiscal-budgetary consolidation) and the depreciation of the real effective rate of the national currency. Total exports and imports could increase at average annual rates of 5.5, respectively 6.9 percent between 2020-2022,” says Andrei Radulescu, BT’s chief economist.

According to Romanian export associations, 2019 was the worst year of the postcrisis period for Romanian exports, having marked the first time when the export growth rate was lower than the GDP’s. The trade deficit reached about EUR 17 billion in 2019, according to estimates.