Business Review Issue 29/2012 September 17 - 23

CITY: The second edition of Balkanik, a festival dedicated to the culture of the region, starts in Bucharest at the end of September with plans to celebrate the spirit, authenticity and traditions of the region »page 12

ROMANIA’S PREMIER BUSINESS WEEKLY

SEPTEMBER 17 - 23 / VOLUME 16, NUMBER 29

BRITISH PRESENCE THE LONDON STOCK EXCHANGE SAYS ROMANIA OFFERS UK FIRMS EXCITING AND NATURAL PARTNERSHIPS, MOST RECENTLY FORGED IN ENERGY AND INFRASTRUCTURE »PAGE 10

WHO IS FINANCING ONLINE STARTUPS? Nasper’s takeover of retailer eMag has given new impetus to the local online market, where securing financing is a tough job. BR maps out the funding options for ambitious Romanianmade online start-ups »page 6

NEWS

NEWS

INFRASTRUCTURE

PLUS

Gold standard

Race is on

The winding road

Austrian asset manager Arteus Capital is launching a new type of loan that uses gold as collateral, targeting mainly companies but also retail clients

The tender for the local spectrum, set to map the telecom landscape for the next fifteen years, started last week with five contenders

Only about 400 kilometers of highway have been built over the past 20 years, despite ambitious plans to upgrade the country’s infrastructure

The EU is still concerned with Romania’s ‘fragile political situation’ » page 4

» page 4

» page 4

» page 8

Find out what’s on in town with BR’s cultural agenda

» page 14

www.business-review.ro Business Review | September 17 - 23, 2012

NEWS 3

NEWS in brief nership with Lyreco, a provider of B2B office supplies solutions.

With this partnership, RTC will be the local partner of Lyreco in Romania and serve its international customers locally.

Along with the RTC partnership, Lyreco announced a similar one for the Russian market with Samson.

ENERGY Lukoil to put USD 2.5 mln into modernization of auto lubricants unit

Melrose Resources farms out Black Sea concession UK-based Melrose Resources has agreed to farm out 30 percent of its equity in the Est Cobalcescu exploration concession, based in the Black Sea, to the local subsidiary of Australian oil and gas firm Beach Energy. Beach will pay around USD 4.8 million to Melrose Resources, which represents a proportionate share of past license costs and of a 3D seismic survey.

Melrose Resources will retain operatorship and a 40 percent working interest in the concession, once the deal is closed. Meanwhile, Beach and local firm Petromar Resources each hold a 30 percent stake in the offshore Romanian concession.

Melrose Resources said the deal would reduce its capital budget by around USD 8.4 million and drilling costs by an estimated USD 16 million over the next two years. The deal requires the approval of the Romanian National Agency of Mineral Resources.

IT Ceragon Networks enters local market with R&D center Longhaul wireless solutions developer Ceragon has opened a research and development center in Bucharest, following an initial investment of USD 1 million during its first year of activity.

However, next year the firm’s R&D spending in Romania is expected to double.

The center is located in Victoriei

FMCG Beer market returns to growth with 4.5 percent rise in H1 Photo: Mihai Constantineanu

LLK-International, a subsidiary of Russian oil firm Lukoil, plans to invest USD 2.5 million in upgrading lubricants production at its local oil refinery Petrotel-Lukoil by the end of this year or early next year, said Michael Weiss, general manager of LLK Lubricants in Eastern Europe, quoted by Interfax newswire, according to steelguru.com.

He said that Lukoil had invested USD 3.5 million last year in the refinery located in Ploiesti, some 65 km from Bucharest.

Weiss said the company was investing in an oil-blending installation to make it fully automated, in addition to packing equipment and storage overhaul.

This summer Lukoil began to produce locally a new generation of engine oils applied to lubricants that meet the standards of Euro-5 and 6 engines.

IMAGE of the week Roma deliver cri de couer Around 200 Roma protested last week in front of the government building at the fact that French officials are coming to Romania to get better acquainted with their situation, while the government “only pretends to understand their problems.” The French domestic affairs minister, Manuel Valls, and the minister delegate for European affairs, Bernard Cazeneuve, were in Bucharest last week to discuss with the Romanian president, Traian Basescu, and the prime minister, Victor Ponta, the issue of the Roma, some of whom were expelled from France this summer. Approximately 15,000 Roma people are living in France.

Square and already employs 16 engineers, but the company forecasts it will double its headcount by yearend.

The decision to establish such a facility in Romania was made in December 2011, and the center was opened in April.

However, it is only now that the company has announced its existence.Another six locations, including India, China and Ukraine, were taken into consideration but Romania was chosen due to proximity factors, as it is close to other Ceragon R&D centers and no more than a two-hour flight from most European destinations.

up by 0.7 percent this August compared to the previous month while non-food products were 0.5 percent more expensive, according to data released by the National Institute of Statistics. The highest price hikes were reported for fresh and canned vegetables (+5.54 percent in August compared to the previous month) and fuels (+2.01 percent). The price of services went up by 0.1 percent.

Price increases this August took the annual inflation rate to 3.88 percent, the highest level so far this year. The central bank’s inflation rate target for 2012 is 3.2 percent, plus or minus one percentage point.

MACRO

RETAIL

Rising food prices push annual inflation up to 3.88 percent in August

RTC enters partnership with Lyreco

Romanians saw food prices go

RTC Proffice Experience, the office supplies distributor, has closed a part-

Romanians drank 8.7 million hectoliters of beer in the first semester of this year, up 4.5 percent y-o-y, according to the Association of Romanian Brewers.

The rise in sale volumes was triggered by good weather this summer and the European Football Championship, as in the first quarter of 2012 volumes dropped 5 percent, the association previously announced.

The main players on the local market and also members of the association – Bergenbier, Heineken Romania, Romaqua Group, United Romanian Breweries and Ursus Breweries –reported a 5.4 percent increase in volume (7.8 million hectoliters) for the first six months of this year.

Strongly affected by the economic crisis which triggered a major decrease in Romanians’ purchasing power, the brewing market has faced a significant consumption contraction over the past few years, with the total decrease over 2009 and 2010 reaching 16 percent. The first signs of stabilization detected during 2011, when the market was flat, were replaced by renewed decline in the first three months of this year.

ONLINE Free apps will account for nearly 90 percent of total downloads in 2012 Free applications will account for 89 percent of total downloads in 2012, according to Gartner, Inc. Worldwide mobile app store downloads will surpass 45.6 billion in 2012, with free downloads accounting for 40.1 billion, and paid-for downloads totaling 5 billion.

Besides a few major app stores from global vendors such as Apple’s App Store, Google Play and Microsoft’s Windows Phone Marketplace, Gartner analysts said there are also outlets from third parties that attract users with their brands or take advantage of the lack of dominant players in some markets.

www.business-review.ro Business Review | September 17 - 23, 2012

4 NEWS FINANCE

AUCTION

Telecom tender battle finally underway

Arteus Capital to launch gold-backed loan

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Courtesy of Arteus Capital

Arteus Capital executives lay out the benefits of gold investment

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ustrian asset manger Arteus Capital plans to launch a new type of loan that uses gold as collateral by year end, sustaining the recapitalization of companies during a tough period for bank financing.

The loan, made in Euros, represents 65 to 75 percent of the gold holdings and will have a maturity of 3, 6, 9 or 12 months, according to Kubanda Levente, regional manager of the regional Arteus office in Brasov. The gold needs to be stored by Arteus in order to make it eligible for the loan.

He said the same loan had already been launched in neighboring Hungary at an interest rate of 6.5 percent, and was growing in popularity.

Arteus opened its first office in Brasov last year to serve the Transylvania region and came to Bucharest this spring, in order to tap into a larger pool of customers, mainly people working for multinationals. The company targets the Iasi and Constanta cities for further expansion next year.

The company targets a turnover of EUR 12 million by year end, and has 500 customers in Romania, out of 5,000 in its international portfolio. They have combined gold holdings of 150 kilograms with a market value over EUR 6 million, according to Sebok Istvan, executive director of Arteus Capital Romania.

“This year we have registered significant growth in the savings program,” said Istvan. Aside from this, the firm offers professional services for clients that want to invest in gold and other precious metals, along with a buyback option for the gold.

Arteus representatives told BR the Romanian gold investment market is in its early stages and that they are trying to raise awareness regarding this

option. At present, the company stores only 20 to 30 percent of the acquired gold in its deposits. Most investors want to control the storage of their physical gold, and consider the banks as an alternative.

The company plans to add eight sales managers by year end in the Bucharest office, which will handle a team of four to five consultants each.

Right now, the firm relies heavily on the recommendation system.

Simon Attila, country executive manager at Arteus, said the firm’s customers are average and high earners who want to plan for their financial future. He added that the firm advises its customers to diversify their investment portfolio, and put around 30 percent into gold, the same proportion into real estate and the same again into foreign currencies.

Gold prospect One ounce of gold is currently trading in the USD 1,730-1,750 band, but estimates suggest that it could climb to around USD 2,000 by year end, according to Istvan.

“The political decisions in Europe have been a determining factor in the price of gold in the last two weeks, which moved up by 6.9 percent,” said Istvan.

He added that banks purchased 80 tons of gold in the first quarter and that Russia, Kazakhstan and Mexico are currently the most active gold buyers.

The unlimited bond program recently approved by the European Central Bank and a new round of quantitative easing in the US could see more gold hoarding, concluded the Arteus executive. ∫ Ovidiu Posirca

ast week marked the start of the most important event for the Romanian telecom industry in the next fifteen years, the tender for telecom spectrum. The telecom operators that have signed up are 2K Telecom, Cosmote Romanian Mobile Telecommunications, Orange Romania, RCS & RDS and Vodafone Romania. Even though the Romanian authorities have repeatedly stated that the tender will be open to new players, since this would have a positive effect by increasing competition, no new entrants have submitted an application.

The final results should be announced in October, until which time operators are bound by regulations to refrain from making comments on the proceedings.

The latest update from National Authority for Administration and Regulation in Communications (ANCOM) took place after the second day of bidding. “The primary rounds in the spectrum tender have ended, and the demand no longer exceeds the offer for any of the bands available. The primary stage comprised three rounds,” sounded the announcement.

“The tender for allocating frequencies in 800 MHz, 900 MHz, 1800 MHz and 2600 MHz bands will continue with

supplementary rounds, since there are frequency blocks that have not been granted.” The supplementary rounds are open to all contenders, whether or not they managed to secure frequency blocks in the primary rounds.

There are several reasons why the tender has been awaited with anxiety by the actors in the telecom industry.

First and foremost, it lays the foundations of the telecom market in Romania for the next 15 years. Operators will fight tooth and nail to obtain the desired spectrum: according to reports, each operator will go for a mix of frequencies, but what is at stake is obtaining the frequencies that will allow them to introduce 4G services on the Romanian market.

Secondly, the tender is important because of its span: this is the first time when such an extensive event has been organized on the Romanian market.

Last but not least, it is important because the Romanian state can greatly benefit, cashing in as much EUR 700 million from the tender. However, the money will not go to the development of the sector as the Romanian government has announced that all the proceeds will go on agriculture. ∫ Otilia Haraga

POLITICS

Europe tries to fix Romania’s political crisis

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he European Parliament debated last week the aftermath of the political crisis that engulfed Romania this summer, which culminated in the suspension of President Traian Basescu and his return to office after two months following a failed impeachment referendum.

The European Commission reacted after witnessing a series of moves by the Romanian authorities, which impacted the rule of law, democratic checks and balances and the independence of the judiciary, said Viviane Reding, the EU Commissioner for Justice, Citizenship and Fundamental Rights.

The commissioner highlighted that laws and emergency decrees were passed swiftly in Romania, some of which aimed to limit the powers of the Constitutional Court, a key institution in the skirmish between Brussels’ top brass and the Romanian PM Victor Ponta.

EU representatives strongly advised Romania’s politicians to respect the decisions of the Constitutional Court. PM Ponta and the justice minister, Titus Corlatean, were summoned to Brussels to convince the European leader that Romania abides by democratic practices and respects the independence of the

judiciary. The president of the European Commission, Jose Manuel Barroso, seeking a clearer picture of the political stalemate in Romania, asked PM Ponta to answer 11 questions on domestic political developments. “The Romanian authorities addressed some of our concerns, and in particular restored the constitutional norm in the run-up to the impeachment referendum,” said Reding.

However, she warned the situation is Romania remains fragile and further EU support is needed. “The commission will continue to closely monitor the situation in Romania,” stated Reding.

The political crisis in Romania sparked a heated debate in the European Parliament. Daniel van der Stoep, a Dutch independent MEP, said “the political soap” made Romania look like a “banana republic”, adding that the EU should stay out of internal struggles.

Graham Watson, a member of the Alliance of Liberals and Democrats for Europe, said that Romania provided a case study of the trials of transition from communism, stressing that the country hasn’t shaken off all the corruption of this period. ∫ Ovidiu Posirca

www.business-review.ro Business Review | September 17 - 23, 2012

AGRICULTURE

Drought costs local agriculture EUR 800 million, says BCR

Courtesy of BCR

Sorin Mititelu, retail segment management director with BCR

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his year’s poor harvest is estimated to generate losses of about EUR 800 million for the Romanian economy, almost half of which could have been avoided if local farmers had proper irrigation systems, according to Banca Comerciala Romana (BCR).

Romania’s agricultural output is particularly vulnerable to weather conditions, mainly due to the poor technologies used by local farmers and the small individual surfaces they cultivate, explained Sorin Mititelu, director of retail segment management at BCR. “Small farmers have the alternative to consolidate their land into larger farms in order to have better access to financing solutions and other opportunities offered by the market economy,” he said.

The main challenge cited by more than half of the 200 small companies from the agriculture sector that took part in the BCR survey is falling production. Some 61 percent of respondents said their priority over the coming period was to adapt the technologies they use to the climatic conditions. However, 34 percent of participants to the survey said banks’ ranges suited to farmers were inaccessible, mainly because of

the paperwork and guarantees demanded by lenders, while another 34 percent said dedicated banking solutions were too expensive. Financing agriculture is starting to represent important business for the banking industry and lenders are working on making their products more accessible, said Mititelu. As part of an autumn campaign, BCR has launched three credit products dedicated to the farming sector to finance current operations as well as investment in technological modernization and the acquisition of land.

Buying farming equipment through leasing is another financing solution for local farmers, said Bogdan Speteanu, president of BCR Leasing, although this alternative is little known and the market for such services is well below potential.

The need for agricultural equipment is huge in Romania, given that for every 100 households there are 3.2 tractors, against 11.9 percent in Hungary, 43.9 in Poland and 70.9 in the Czech Republic, he added. At present buying agricultural equipment through leasing is an advantageous solution as it is cost effective, requires no additional guarantees and has fiscal incentives such as the payment of VAT throughout the entire leasing period, said Speteanu.

The leasing market for agricultural equipment has grown in recent years from EUR 37.3 million in 2007 (less than one percent of the total leasing market) to EUR 73.7 million last year (5.75 percent) according to data from the Financial Companies Association in Romania (ALB Romania). Speteanu said he expects the market to maintain a similar value this year to the one reported in 2011, although in the first semester the figure was below that of the same period of last year. In 2013 it could rise to EUR 130 million and there is still room for growth given that in Romania about 15 percent of the agricultural equipment acquisitions are made through leasing, while in Western Europe the share is about 50 percent. ∫ Simona Bazavan

“UNDP Romania advertised the following positions on the UNDP – GEF Project Improving Energy Efficiency in Low-Income Households and Communities in Romania l Market Research / Sustainable Materials Specialist – short term consultancy l Enterprise Development Specialist short term consultancy l Task Leader – Service Contract Deadline for submission of applications is 30 September 2012.

For more information, requirements, and selection criteria, please visit UNDP Romania website at the following link: http://www.undp.ro”

NEWS 5

www.business-review.ro Business Review | September 17 - 23, 2012

6 LINKS

Local e-entrepreneurs chase the cash The most significant transaction of the year on the Romanian online market – the takeover of retailer eMag, which posted a EUR 145 million turnover in 2011, by Naspers investment fund – has injected new confidence into the domain. Securing financing is a rat race in which only one out of every ten startups wins, and making the right choice for one’s business is essential. ∫ OTILIA HARAGA “We have proven that entrepreneurship works in Romania and that one can develop a sound business, strong enough to persuade a global IT giant to make you the spearhead of the group’s development in the region. It is actually an important step for the local industry and a signal that Romanian players can be attractive to great international investors,” said Iulian Stanciu, GM of eMag, upon completing the transaction.

Industry players welcomed the deal as an endorsement of the local market.

Marius Ghenea, online business angel says the fact that the greatest equity transaction in Romania in 2012 was in the online, “speaks volumes about the significant role the local online scene is starting to play in the economy, but also about the lack of major transactions in Romania in other business sectors”.

Calin Stefanescu, CEO of Tjobs, tells BR, “Many investors still see Romania as a kind of Wild East. Others are better informed and probably have more guts.

Proof of that is the large number of foreign investors in recent years.”

However, in all likelihood, foreign investors are very much in tune with the latest developments in the Romanian online world. “The IT sector in Romania comes second only to Poland in the region in terms of talent pool,” says Ghenea.

However, Romania performs poorly in fiscal and legal stability. “The political and economic climate can still be quite unstable in Romania, which does not make it a very attractive market for maintaining a business here on the medium and long term. Many successful Romanian startups have moved to London or the United States,” online entrepreneur Dragos Roua tells BR. So far, investments in businesses with operations on the local market have confined themselves to announcement platforms (such as eJobs or BestJobs) and e-commerce projects (such as PayU, Emag, and Elefant.ro).

On the other hand, there are also examples of business investments that have started in Romania and approached the international market, such as uberVU, Brainient and Avangate, points out Bog-

Online startups have several financing choices, none of which is risk-free

dan Iordache, founder of How to Web. manage to convince even the closest “From my own experience, if one out people to you, who trust you, that your of ten projects manages to secure fi- ideas are viable, there might be a probnancing, that is good,” says Roua. Ro- lem with your business plan,” Cristian manian online ventures find it hard to Logofatu, co-founder of Bittnet Systems, get funds. Most of them are not able to tells BR. attract funds in equity form but rather But, locally, there is a catch. “In Roin the form of debts they accumulate to- mania ‘3F financing’ is difficult, perhaps wards providers, banks, leasing compa- partly because we do not have a very nies, etc. “This debt financing can also solid middle class,” says Iordache. be useful, on the condition that it is bal- “Many entrepreneurs (those whose projanced with a minimum owned capital ects target international markets) selfor capital attracted as equity,” explains finance as freelancers and, as soon as Ghenea. the project takes shape, they apply to acceleration programs. The local online The path to financing is market still has very few verticals that are sufficiently developed to allow fistrewn with many choices Which brings one to the question: ex- nancing for business.”

It may sound like a paradox, but peractly what financing opportunities can haps one of the prerequisites for secura Romanian online startup tap into?

The first port of call for an up-and-com- ing financing is being able to manage ing entrepreneur is the so-called ‘3Fs without it, suggests Stefanescu. “The (friends, family and fools)’, “a good fi- basic criterion for obtaining investment nancing source for entrepreneurial proj- is to be able to prove that the business ects in technology, IT, and online, can function without a capital infusion. where extremely interesting businesses Apart from this, one needs a real plan, a can develop in a relatively short time,” sound knowledge of the market, a clear vision and unbreakable motivation,” he Ghenea points out.

For those who think that “begging” argues.

Another important financing source from friends or relatives is sure to yield, think again. “A successful author said is the cash flow generated by the busithis is a very important test: if you can’t ness itself. “If the business plan is care-

fully conceived and delivers a positive cash flow, then this is a very healthy financing source,” says Logofatu.

Then there is the bank. But to ask a bank for anything, one must be able to put on the table a very clear investment project and guarantees. “These can take the form of an apartment, guarantees from the 3F, or from the Loan Guarantee Fund for SMEs, but it is very important to be aware that in for banks, a small startup must bring many real guarantees to receive loans, in addition to profit and turnover conditions which are compulsory,” says Logofatu.

However, the bank does not look at business plans. “While one can go to the bank to finance investments or credit lines, for business plans one should resort to cash flow or investors. The people or entities who see the business plan must be used to analyzing, checking it, believing in it and taking entrepreneurial risks. You cannot get that from a bank,” says Logofatu.

For a startup that has emerged only recently, another option to consider is scouting for a business angel.

“In the last few years, seed or business angel financing is becoming increasingly accessible, given that there are more and more competitions for startups, while a rather strong community of angel investors has crystallized in the online domain,” says Roua.

Business angels offer certain undeniable benefits. “They can see the potential of a project and take bigger risks than an investment fund or a bank, in the hope of a better return on investment,” says Ghenea. “Furthermore, they can support a startup with more than the invested sums, because they can come up with useful contacts, help with the strategy and tap into their experience from previous businesses.”

However, Iordache cites some caveats. “Success stories are few and far between, mostly because there are few people with experience in technology who have sufficient cash to make repeated investments, while those from the offline industry are used to other business models.” He adds, “What is missing in Romania, and there are now at least two initiatives that will correct this problem, is the coagulation of business angel communities that should finance technology companies.”

There is also the risk of the clash of mentalities between the angel and the entrepreneur, which can create discomfort. To avoid this, the entrepreneur can choose another path, that of approaching investment funds, which “get involved less” and are more “rigid,” says Stefanescu. “After your model is validated and you have discovered that you can become profitable, if you think you can make the business strongly scalable and put it on steroids through a consistent investment, then it is time to talk to a venture capital fund,” Alexandru Lapusan, CEO of Zitec, tells BR. Either way, an entrepreneur must be very aware of what he or she is looking to obtain from approaching a business angel or an investment fund, because

www.business-review.ro Business Review | September 17 - 23, 2012

LINKS 7

they are different propositions.

“A business angel can have a different strategy from an investment fund: going for long-term investments or ones in companies with complementary fields of activity but with the same customer base in order to do cross-selling.

The greatest risk is to lose the chemistry between the founders of the company and the investors. It is hard to have someone on the boat whom you’d rather have left on shore,” Iordache says.

On the other hand, an investment fund can help the entrepreneur to structure the company and make it grow at a rapid pace.

Local examples that show it can be done “Businesses don’t die for lack of investors, they die because of those who manage them and who often do not look for enough solutions to support the business. In the words of a good Romanian trainer, some prefer ‘excusabilia’ to justify the failure of their business,” says Stefanescu.

Romanian financing success stories includes examples such as Bittnet Systems and Tjobs, which have managed to attract investments locally, and Zitec, a Romanian company which has invested in startups abroad.

Bittnet Systems managed to secure its first financing round (the sum is confidential, bound by contract) at Venture Connect from business angel Razvan

Calin Stefanescu, Tjobs

Cristian Logofatu, Bittnet

Capatina.

“At the moment of the investment, Bittnet was not a new company, we already had five years of activity under our belt. If we had not received it, our development plans would have been implemented at a slower pace. This was precisely the reason why we went out there on the market: to speed up the development, use a capital injection, the same as over-tuning a car engine to obtain more horsepower more quickly,” explains Logofatu.

The money was used to boost the

sales headcount, one of the main points in the development plan. Now, the Bittnet sales team numbers nine more people. “We discovered strong synergies with the new shareholder. The area of ‘sustained marketing campaigns’ matched perfectly with Mr. Capatina’s expertise, and we are developing this point in the business plan together as well,” says Logofatu.

Another local startup, Tjobs, managed to secure EUR 500,000 of financing from an investment fund present on the Romanian market and two business

angels from Western Europe (Andreas Cser, business angel Frasier Finance and Alexis Bonte and Fundatia Post-Privatizare).

“We already had a very clear plan for the coming years, and the investment allowed us to go through some stages of the business process more rapidly. It was not only the money that made a difference, but the business contacts of our investors which opened doors much faster,” says Calin Stefanescu of Tjobs.

The example of Zitec shows the other side of the coin: a Romanian company financing startups abroad. So far, Zitec has provided consultancy and software development services to American, European and Romanian startups that were later taken over by other entities. These include Proventys, taken over by McKesson, PolarRose bought out by Apple, and Paravion.ro, which went to GED investment fund.

Investment consists of offering more resources or consistent discounts on the listed prices. “We are currently supporting three American startups: Online.tv (which owns VideoPublishing.com), Zipongo.com and HuddleHero.com.

The sums invested in the three startups over the past four years exceed EUR 500,000 and our participation in these is under 10 percent,” says Lapusan. otilia.haraga@business-review.ro

www.business-review.ro Business Review | September 17 - 23, 2012

8 INFRASTRUCTURE

responsible for building the MedgidiaConstanta segment – won the new tender.

Some of the most important sites currently undergoing work are on the 594 km A1 highway connecting Bucharest with Nadlac on the Hungarian border, part of the Pan-European Corridor IV. The highway is divided into numerous segments with about a third of its total length being completed and another third in the works. The 113 km part of the highway connecting Bucharest with Pitesti was built in 1973, and in 2007 a 15 km Ploiesti bypass was delivered. The only segments delivered since then are the 32.3 km highway connecting Timisoara to Arad, which cost EUR 194 million and is some 98 percent completed, and a Sibiu bypass. Another 32 km section between Deva and Orastie, which is being built by Austrian Strabag and Romanian constructor Straco Grup, should be opened to traffic this October, and works will be completed in February 2013, according to the CNADNR. Part of the same highway, a 9.5 km segment between Timisoara and Lugoj could be delivered this autumn, ahead of the official April 2013 deadline, making it a first in Romania.

High costs for local highways: schedule delays and recent budget cuts are putting pressure on the development plans

Highway construction advances at snail's pace Romania is preparing for what will be the most expensive highway it has built so far, the 289 km highway connecting Targu Mures and Iasi, with costs predicted to range between EUR 11 - 60 million per km. BR looks at what highways have been opened so far this year and what should be delivered by the end of 2012. ∫ SIMONA BAZAVAN Over the past 20 years Romania has built only about 400 km of highway, although the authorities have been constantly talking up ambitious plans for highways to cross the country.

The high costs for the 289 km highway connecting Targu Mures and Iasi are mainly due to the difficult terrain, the Romanian National Company of Motorways and National Roads (CNADNR) announced at the beginning of September.

But while such ambitious plans remain in the first phase of development, other highway projects where works began even several years ago remain unfinished.

After numerous delays the 62 km highway that connects Bucharest and Ploiesti was finally opened to traffic this

July, two years behind schedule. The EUR 450 million project was built by Italian consortium Impressa Pizzarotti/Tirrena Scavi and an association made up of local companies Spedition UMB, Pa&Co International, Euroconstruct ’98 and Com-Axa. The two-year delay in completing the project is nothing out of the ordinary when it comes to building highways in Romania, an endeavor that continues to stumble, much to the despair of investors. And while building highways has been cited as a priority by every Romanian politician over the past decade, the reality is very different from the ambitious plans boasted by each and every government.

For example, the above mentioned Bucharest-Ploiesti segment (62 km) is part of the future A3 highway (565 km), or the Transylvania Highway, which should connect Bucharest with Bors, in

western Romania, close to the Hungarian border. Only about 20 percent of this highway is presently finished although the contracts to build it were signed as early as 2003.

This summer has also seen the partial completion the 20.5 km Cernavoda-Medgidia segment of the Bucharest-Constanta highway as well as the northern part of the Constanta bypass. The entire 197 km highway which connects the capital Bucharest with the Black Sea city of Constanta should have been completed last year, but the authorities said they had to cancel the initial contract signed with French Colas which made the successful bid for the Cernavoda-Medgidia segment as the company “constantly refused to continue works, citing various reasons to justify the delays”. After the contract was canceled, Italian Astaldi and German Max Boegl, the two companies also

The road ahead The government announced last week that the CNADNR will have to limit new infrastructure projects to the budgets approved, meaning some plans will have to be put on hold. The announcement comes after the recent budgetary amendment cut some EUR 290 million from the funds allocated to the Ministry of Transport to a total of EUR 3.05 billion. The largest share of it – about EUR 230 million – was taken from the funds necessary to co-finance projects drawing on non-refundable EU money, according to Mediafax newswire.

Another EUR 24 million was taken from the road infrastructure development budget, which was reduced to EUR 14.3 million. As a result, the CNADNR no longer has the necessary funds to continue works on the rehabilitation of the Bucharest bypass, and other projects too will have to be put on hold.

Despite the cuts, authorities will this autumn announce the companies that have been selected to build the next 107 km of highway. An impressive 95 consortiums made up of local and foreign companies took part in the public bid, proving that public infrastructure projects are big business for the constructions industry in the present economic climate. The increased interest in the projects could also mean the CNADNR will pay less for a km of highway. Some of the bids made by participants go as low as EUR 3.5 million per kilometer of highway, considerably less than the record levels such as EUR 16 million per kilometer paid so for. The 107 km are part of the A3 highway and are divided into five projects varying in length between 28.7 km and 8.7 km. simona.bazavan@business-review.ro

www.business-review.ro Business Review | September 17 - 23, 2012

10 FOCUS

Courtesy of GSP

Energy is an attractive sector for UK companies, with Melrose Resources being the latest to work in Romania

UK businesses tap into local opportunities The Romanian economy is hungry for foreign investment and UK businesses are keen to utilize the country’s qualified workforce, relatively low costs and the significant EU funds being made available to improve the nation’s infrastructure. ∫ STEVE HEMSLEY Historically the UK has not been a traditional European trading partner for Romania, with that honor going to countries such as Austria, Holland and Germany. Yet things are changing.

The British Romanian Consultancy, which organizes trade missions for UK companies, estimates that there are already more than 4,500 British businesses in Romania. Many firms regard Romania as the perfect EU gateway to the East and the Balkans, giving them access to more than 300 million consumers.

In March the London Stock Exchange (LSE) and the Bucharest Stock Exchange (BSE) signed a joint

agreement to raise awareness in the UK of Romanian investment opportunities. The LSE says Romania is one of the fastest-growing Central and Eastern European economies and offers UK firms “exciting and natural partnerships”.

The LSE and BSE are co-promoting a Romania Investment Forum and the LSE is running seminars, training courses and coaching sessions for members of the BSE. The UK-listed oil and gas exploration company Melrose Resources recently won a contract to begin seismic surveys and drilling in 2,000 sqkm of the Romanian Black Sea. This area is largely underexplored because it was for many years subject to a boundary dispute between Romania

and Ukraine. The International Court of Justice found in Romania’s favor in 2009.

The project is a positive example of British investment in the country as Melrose is spending USD130 million to help Romania increase its supply of natural resources as demand for energy grows. The company is also bringing British technology and engineering expertise to the country.

According to business advisers Ernst & Young UK, one of the most dynamic sectors for UK firms to venture into over the next few years will actually be renewable energy. The Ernst & Young Country Attractiveness Indices report found Romania to be one of the top 15 most attractive countries in the world for invest-

ments in wind, solar and geothermal power, putting it ahead of Poland and Ireland and on a par with Spain, Sweden, Australia and Japan.

However, a spokesman for Ernst & Young says UK companies considering investing in Romania are still frustrated by the lack of transparency within the business environment and the amount of bureaucracy.

The London Chamber of Commerce advises UK firms thinking about entering Romania to spend a considerable amount of time researching their particular market and to secure a local resource as soon as possible.

This could be a distributor agreement, a subsidiary, a joint venture deal or an acquisition. A local deal is often vital if companies want to access available EU funds.

London-based executive recruitment business Antal International began working in Romania in 1998 but only opened its first Romanian owner-managed office in 2003. It now has 20 offices across Romania, including a head office in Bucharest. It specializes in industrial and technical recruitment and finding senior staff for the IT, pharmaceutical, retail and fast-moving consumer goods sectors.

When Romania joined the EU in 2007 Antal noticed an influx of multinational firms moving into the country and requesting its services. A survey by Antal Romania reveals some positive recruitment trends for this year too, with hiring activity in 2012 up 30 percent compared to 2011.

The company is opening a new office in Cluj-Napoca and expanding into medical and healthcare recruitment for local private clinics.

Country manager Irina Vasile says there have been some cultural obstacles to overcome in Romania. “The business structure is rather formal and hierarchical compared to the UK and conducting meetings in English, French or German as well as Romanian is something we have had to adapt to.”

The executive search industry is quite mature in the UK but it was new to many Romanian bosses. “Some clients have asked us to delve deeply into the financial and personal life of candidates. We have had to educate them about our role, which is to source suitable people for senior or specialist roles and present them to clients.”

Antal is helping employers to make the most of Romania’s economic potential by plugging some important skill gaps. “For years there has been talk of a talent crisis with many industries reporting skill shortages in IT, for example,” says Vasile.

“We have also been asked to fill skill gaps in sales positions within technical industries where applicants need experience in marketing as well as a deep understanding of the subject.

Candidates with both are highly sought after.”

www.business-review.ro Business Review | September 17 - 23, 2012 UK companies have also found it difficult to get used to the male-dominated nature of many Romanian companies. In the UK the recruitment industry attracts many women and Vasile says that this was initially met with resistance by some clients. “The overall employment market in Romania still lacks diversity and a local understanding of the importance of women in business, but it is far better today than it was.”

“The business structure is rather formal and hierarchical compared to the UK and conducting meetings in English, French or German as well as Romanian is something we have had to adapt to.”

Irina Vasile, Country manager Antal Romania There are examples where a UK company’s experience in Romania has helped other global businesses to enter the country and prosper. UK construction management consultancy Savant had a long history of success here before it was bought by the US technical and management support giant AECOM in 2009.

Savant’s knowledge of Romanian business and culture has helped AECOM win a number of large contracts supported by EU funding.

These include developing Romania’s national transportation system across road, rail and air as well as Constanta Port and River Danube navigation, all with an emphasis on sustainability.

The company is working closely with the Ministry of Transport and Infrastructure to meet predicted transport demand in 2015, 2020 and 2030.

AECOM is also designing and building the Lugoj-Deva and Orastie-Sibiu motorways and the Deva-Orastia bypass.

AECOM has opened a new office in Bucharest on Polona Street and the Romanian team is now an integral part of AECOM’s worldwide network of 45,000 creative and technical experts.

Yet challenges remain. Director Alfredo Biosca says there is limited experience in Romania of working on such big projects. “We are helping to boost technical and administrative competence by leveraging our global expertise,” he says. “We have introduced best practice procedures and a robust personal development program for our staff.”

UK companies are being encouraged to look for business opportunities that contribute to Romania’s development priorities such as energy and infrastructure. Also, more UK manufacturers are expected to invest in Romania as they take advantage of the country’s convenient location, which shortens the distance for export sales to the Balkans, the Middle East and Russia.

Romania’s huge potential means ambitious UK companiesthat are keen to expand are searching out local partners to help them deal with the challenges that still exist. ∫

Steve Hemsley is a British business journalist who has written for The Financial Times, The Sunday Times, and CNBC European Business magazine.

The size of the local market is one of the arguments in Romania’s favor

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www.business-review.ro Business Review | September 17 - 23, 2012

Festival celebrates fiery Balkans culture Do you know what the cultures of Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Greece, Macedonia, Montenegro, Romania, Serbia, Slovenia, and the European Turkey have in common? The answers can be found at the Balkanik Festival.

Serbian orchestra Boban and Marko Markovic combines brass and percussions

Romanian band Taraf de Haidouks

Shavale fanfare comes from Iasi village Zece Prajini, in central Romania

Courtesy of Balkanik Festival

Turkish act Baba Zula mixes belly dancing, elaborated costumes, and theater

∫ OANA VASILIU A celebration of the new Balkan spirit, tradition and authenticity through music, dance and a lot of joy will start on September 21 in the Uranus Garden The Balkanika Festival is the first event showcasing Balkan music and culture in Romania, and at its center is humanity, multiculturalism and expression in its purest form.

According to the festival’s organizers, interest in Balkan music has increased in recent years, with the fact that the first run attracted some 5,500 people evidence of that. This edition of Balkanika Festival will last three days with the chief draw music by top artists of international stature from Serbia, Hungary,

Turkey, Bulgaria and Romania.

Four bands will play at the Balkanika Festival, more than last year, and by popular demand Baba Zula will be back on stage.

Mixing oriental instruments such as the darbuka, electric saz, and spoons with electronics and modern approaches, Baba Zula creates sounds that have been defined as “space sound of Istanbul”, “Oriental Dub” and “contemporary Folk Istanbul”.

Baba Zula have composed various works for movies and appeared in the documentary “Crossing the Bridge” – The Sound of Istanbul from director Fatih Akin, which was included in the official selection at Cannes in 2005.

Boban and Marko Markovic Or-

chestra is an ensemble of wind musicians and percussionists internationally recognized as the best band in Serbia since the 1980s. Besides their 13 albums and hundreds of concerts, the orchestra has performed in two of Emir Kusturica's films, “Underground”, awarded the Palme d’Or at Cannes 1995, and “Arizona Dream”, winner of the Golden Bear at the Berlinale 1993.

Romanian outfit Fanfare Shavale come from a village whose name translates as Ten Poles, which has the reputation of having the biggest number of bands in the country, with every person knowing how to play at least one instrument.

Formed in Sibiu in 2003, the Crispus band has turned playing with fire into a real art, and the result is per-

formances that combine pyrotechnics with acrobatics, creating unique visual effects. The band holds a world record for fire breathing.

Dragos Lumpan’s photo exhibition The Last Transhumance is the result of five years of research, six countries and 40,000 km traveled, 100,000 photos, 70 hours of video and 100 hours of audio recordings about the disappearance of a traditional lifestyle, all transformed into a visual documentary. oana.vasiliu@business-review.ro The full schedule and pricing info for the Balkanik festival is available at business-review.ro/going out.

www.business-review.ro Business Review | September 17 - 23, 2012

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WHO’S NEWS

CULTURAL EVENTS CALENDAR EXPO

MUSIC

The Peasant Museum Days September 13-23 The Peasant Museum The Peasant Museum is staging an event to celebrate Cross Day with an exhibition, icon sales, book launches, movies and traditional national music. All Romania’s provinces will be represented by crafts, culinary traditions, traditional outfits and blacksmiths, potters, carvers and icon painters, as well as documentary films, theater performances and several art exhibitions, with a focus on Cross objects.

Leonard Cohen concert September 22, from 20.00 Constitutiei Square

Gifts Show Digital Print & Sign 2012 September 19-22 Romexpo Gifts Show is the only event dedicated exclusively to the promotional items sector. The exhibition is open to all companies importing, producing and distributing in the area of promotional products and aims to present new trends to visitors.

The show will take place simultaneously with Digital Print & Sign 2012, an event dedicated to the digital printing industry in Romania, which annually attracts dozens of exhibitors and over 5,000 trade visitors.

Romanian International Furniture Fair September 19-23 Romaero Baneasa The Romanian International Furniture Fair (SIM) aims to mix tradition, reputation and efficiency with innovation and good taste. The largest companies in the furniture industry worldwide will present their latest achievements, from all major sectors of industry. The fair is considered the biggest exhibition in Romania for furniture, wooden products, materials and accessories, interior decoration, equipment and machines for wood processing.

ISSN No. 1453 - 729X

songs by artists like Bob Marley and The Wailers.

FILM Portuguese Film Days September 19-21 Romanian Cultural Institute The fifth edition of Portuguese Film Days will be held in Bucharest at the Romanian Cultural Institute, ICR (38 Aleea Alexandru). The event is organized by the Embassy of Portugal and Embassy of Brazil in partnership with the Romanian Cultural Institute, with the support of Instituto Camoes.

This year’s event will feature documentary or fictional movies which present the reality of life in Brazil, Angola and Portugal.

Singer-songwriter Leonard Cohen will return to Bucharest for the third time, to give a concert to promote his twelfth album. The Old Ideas Tour 2012 features songs from the Canadian’s latest album, as well as the hits that transformed him into a legend. The Old Ideas album became a bestseller across the globe upon its release in January and debuted at number one, making it the highest charting album of his career.

Bucharest Reggae Weekend September 21-23 Old City Center, St. Anton Square A pulsating reggae beat will enliven the Old City Center with rhythms provided by General Escu, Mr Levy, Chesarion, Johnny King, El Negro, Ras Dawa, Dippa Wizz, Sistah Rastahfairy, Steinmacher Albert and more. Derived from a series of musical genres that started with Mento, a type of Jamaican folk music, reggae music rose to global prominence in the 1970s when it burst onto the international scene through popular

FOUNDING EDITOR Bill Avery EDITOR-IN-CHIEF Simona Fodor SENIOR JOURNALIST Otilia Haraga JOURNALISTS Simona Bazavan, Ovidiu Posirca, Oana Vasiliu COPY EDITOR Debbie Stowe COLLABORATORS Anda Sebesi ART DIRECTOR Alexandru Oriean PHOTO EDITOR: Mihai Constantineanu PHOTOGRAPHER Laurentiu Obae LAYOUT Beatrice Gheorghiu

Five movies will be screened during the event: Guimaraes, European Cultural Capital (45 minutes, RadioTelevisao Portuguesa, Portugal, 2012), The Hero (95 minutes, directed

by Zeze Gamboa, 2005), Joana Vasconcelos, Independent Heart (52 minutes, Joana Cunha Ferreira, 2008), The Year my Parents went on Holiday (110 minutes, Cao Hamburger, 2006) and If I Were You (104 minutes, Daniel Filho, 2006).

Premiere Hope Springs Opens September 21 Kay (Meryl Streep) and Arnold (Tommy Lee Jones) are a devoted couple, but decades of marriage have left Kay wanting to spice things up and reconnect with her husband.

When she hears of a renowned couples’ specialist (Steve Carell) in the small town of Great Hope Springs, she attempts to persuade her skeptical husband to fly off for a week of marriage therapy.

Director: David Frankel Starring: Meryl Streep, Tommy Lee Jones, Steve Carell On at: Movieplex Cinema Plaza, The Light Cinema, Hollywood Multiplex, Grand Cinema Digiplex, Cinema City Sun Plaza, Cinema City Cotroceni, Glenade Studio, CinemaPRO

PUBLISHER Anca Ionita EXECUTIVE DIRECTOR George Moise SALES & EVENTS DIRECTOR Oana Molodoi MARKETING MANAGER Ana-Maria Stanca SALES & EVENTS Ana-Maria Nedelcu RESEARCH Catalina Costiuc SUBSCRIPTION Lili Voineag PRODUCTION Dan Mitroi DISTRIBUTION Eugen Musat

BR welcomes information for Who’s News. Submissions may be edited for length and clarity.

Get in touch at simona.bazavan@business-review.ro

Dato’ Nik Mustafa Kamal Bin Nik Ahmad is the new ambassador of Malaysia to Romania. He began his diplomatic career in 1984 when he was appointed to the Administrative and Diplomatic Service of Malaysia as assistant secretary in the Ministry of Foreign Affairs.

Before coming to Romania he served as High Commissioner of Malaysia to Nigeria and prior to that he was consul general to Davao City. He holds a Bachelor of Economics.

BUSINESS AGENDA September 27 ∫EVENT Business Review organizes the German-Austrian Business Forum. Find out more at http://business-review.ro/brevents/

September 28 ∫EVENT 08:30 Business Review organizes the 11th edition of Tax&Law, an event that reviews the recent fiscal and legal changes that impact on the business environment. Find out more at http://business-review.ro/brevents/

October 24 HART Consulting organizes the fifth edition of HART Strategic Conferences on talent management at JW Marriott Hotel.

By invitation only.

PUBLISHER Bloc Notes Media ADDRESS No. 10 Italiana St., 2nd floor, ap. 3 Bucharest, Romania LANDLINE Editorial: 031.040.09.32 Office: 031.040.09.31 EMAILS Editorial: editorial@business-review.ro Sales: sales@business-review.ro Events: events@business-review.ro