Business Review Issue 37/2013 November 18 - 24

INTERVIEW: Felix Tataru, senior vice-president of IAA Global, lets Business Review in on plans to expand the scope of the association to new countries such as Brazil, Argentina and Germany »page 6

ROMANIA’S PREMIER BUSINESS WEEKLY

November 18 - 24, 2013 / VOLUME 17, NUMBER 37

L U F T T N R E A M T N A ES V IN The Romanian art market reached EUR 25 million last year, with the top-selling artists being Nicolae Tonitza, Nicolae Grigorescu and Gheorghe Petrascu » page 12 Photo: Laurentiu Obae

MONEY

Lending a hand

T OUOW! N

Romania wants greater involvement from the banking system in the management of EU funds, says Eugen Teodorovici, minister of EU funds

» page 8

www.business-review.eu Business Review | November 18 - 24, 2013

NEWS 3

NEWS in brief

BUSINESS AGENDA November 20 - 21

How to Web Bucharest 2013, the event that puts participants in front of leading innovators, entrepreneurs and professionals, is organized at Crystal Palace Ballrooms. More at 2013.howtoweb.co

AUDIT KPMG revenues up 4 percent to EUR 36.5 million

November 21

Photo: Agerpres

The professional services firm KPMG posted a 4 percent rise in revenues for its operations in Romania and Moldova to EUR 36.5 million for the financial year ended September 30 2013, said company officials. Tax and legal services generated a quarter of the total turnover, while advisory and audit & assurance services accounted for 29 and 46 percent respectively.

BANKING UniCredit Tiriac Bank nine month profit soars 48 percent to EUR 48.5 mln

IMAGE of the week

Romania’s UniCredit Tiriac Bank saw its profit grow by 48 percent to EUR 48.5 million in the first nine months of the year against the same period of last year.

The consolidated profits of UniCredit Tiriac Bank and UniCredit Consumer Financing , which the lender acquired in January this year, amounted to EUR 46.8 million, after minority interest.

A royal celebration King Mihai I celebrated his name day on November 8 and opened the gates of the Elisabeta Palace in Bucharest to the 6,000 people who came to visit.

The king, along with Princess Margareta, Prince Radu and Prince Nicolae, went out on the balcony of the Elisabeta Palace to greet the crowds. On October 25 King Mihai celebrated his 92nd birthday.

Consolidated operational revenues reached EUR 250 million, while expenses amounted to EUR 118.2 million. The loan book reached EUR 4.3 billion and deposits totaled EUR 3 billion, driven by individuals and midcap companies. The lender said its non-performing loans stood at 10.78 percent, while loan provisioning reached EUR 98.1 million. Consolidated assets amounted to EUR 5.9 billion. UniCredit Tiriac Bank has 188 branches and 3,156 employees for both operations.

According to the Ministry of EU Funds Romania has accessed EUR 4.8 billion of EU funds to date, taking the absorption rate to 25 percent.

EU EC pays Romania EUR 2.6 billion in EU funds in year to November The European Commission (EC), the executive arm of the EU, has reimbursed EUR 2.6 billion in the year to date for EU-funded projects developed by both the public and private sector in Romania.

The largest share of the EUR 726 million was paid under the Regional Operational Program, while the Operational Program for Human Resource Training received over EUR 625 million.

The EC reimbursed EUR 514 million and over EUR 511 million under the transport and environmental programs, respectively. Over EUR 196 million was handed over for the operational program to enhance economic growth.

TELECOM Vodafone Romania’s customer base up, revenues slightly down over past 6 months Vodafone Romania had almost 8.2 million customers on September 30, 2013, a growth of over 300,000 on the same period of last year, according to key performance indicators reported by Vodafone Group. Service revenue reached EUR 352.9 million for the six months ended September 30, 2013, down 3.6 percent year-on-year, as natural variation.

Excluding the effect of the mobile termination rate cut – effective on September 1, 2012 – service revenue increased by 0.9 percent, year-on-year, for the six months ended September 30, 2013, including natural variation, according to the company’s financial statement.Mobile data revenues grew by 31.9 percent in the third quarter on the same period of the last financial year. Vodafone Romania’s Mobile ARPU (average revenue per user) reached EUR 6.5 over the last six months, marking an 8.6 percent decrease year-on-year.Postpaid subscribers accounted for 40.3 percent and prepaid for 59.7 percent of Voda-

fone Romania’s mobile subscriber base as of September 30, 2013. Prepaid users increased by 1.8 percentage points on the same period of last year.

TAXES Local millionaire taken into custody in tax evasion case Romanian businessman Iustin Paraschiv has turned himself in and been taken into custody for 30 days after charges of tax evasion and money laundering were brought against him.

With a fortune estimated at EUR 70 million, he is among the youngest local businesspeople listed in Forbes’ Top 500 Billionaires. Paraschiv, 32, who controls meat producer Carmistin, allegedly coordinated a network responsible for fictitious meat transactions which deprived the state of EUR 12 million. Another seven people are implicated in the case.

Paraschiv’s arrest is linked to a larger tax evasion case dubbed by local media “the meat network.” Some 100 companies are believed to have been part of a network which avoided paying taxes related to poultry transactions. The tax evasion was facilitated by employees of the Public Finance Ministry, representatives of the tax collection department ANAF and other public workers, according to the prosecutors.

09:00 HR Manager organizes the HR Tech Expo & Conference, an event that outlines new technologies in the recruiting business, at Hotel Crowne Plaza Bucharest. By invitation only.

09:30 - 12:00 AmCham Romania and KPMG in Romania organize a workshop on the Foreign Account Compliance Act (FATCA) and the practical implications of this regime on matters of compliance involving Romanian companies at its HQ in Bucharest.

15:30 ∫EVENT Business Review organizes the second Pharmaceutical Industry Roundtable, the only event aiming to gauge trends in the pharmaceuticals industry, at Cismigiu Hotel. Registration is open. Find out more at www.businessreview.eu/br-events

November 25

09:00 ∫EVENT Business Review organizes the fourth Focus on Telecom, where big telecom players outline their plans for the local market, at Athenee Palace Hilton. Registration is open. Find out more at www.business-review.eu/brevents

November 27

09:15 Hart Consulting organizes the conference Gender Diversity: How is it seen in Romanian Business? at Elisabeta Restaurant. By invitation only.

15:00 - 16:30 AmCham Romania organizes a networking session on EU Affairs at its HQ in Bucharest.

Participation is open to AmCham Romania members, free of charge, based on prior confirmation online or via email to mcham@amcham.ro.

November 28

11:00 - 12:30 AmCham Romania holds an event to mark the launch of the AmCham Impact Study, comprising an analysis of AmCham’s impact as an organization as well as its members’ collective impact on the Romanian economy.

By invitation only.

In the last issue of BR, Emilian Dobrescu granted an interview in his capacity as president of the Romanian Sugar Association. He is also the general representative of Agrana in Romania, not the company’s general manager.

www.business-review.eu Business Review | November 18 - 24, 2013

4 NEWS TAXES

3Q Alina Tudose

Business environment and government clash over new taxes

head of strategy & managing director, CohnandJansen JWT

W

Courtesy of Cohnand Jansen

At the start of the year, you said digital would represent 30 percent of the agency’s turnover. How do you see the 2013 estimated turnover mix now?

For 2013, we estimate a turnover of EUR 3 million. However, digital has not grown as estimated: we are at approximately 20 percent of the total (we do not do digital production, only the idea development part). We have instead won clients in the retail and activation side, which has grown more than expected.

What major trends are you seeing in the local advertising industry ?

An important trend involves multinational companies and is the regionalization of creation. We are talking about European pitches, implementation kits and freedom of creation in the case of promotion mechanics and/or retail activations. For Romanian entrepreneurs, I believe what counts the most is the strategic solution that sometimes comes out of the comfort zone of agencies – it can come from a product, a brand or from using media channels. The agencies should instead adjust to the role of consultant.

In January, you obtained the Young & Rubicam license in Romania. What has happened since then in terms of new clients, campaigns and people?

The most important client we have won since affiliating with Y&R is Danone, for which we are developing projects for all the brands in its portfolio. This year we also won the retail side for the Vodafone account. These two clients have grown the agency’s creation and client service teams by seven people in total. Currently, there are 42 people working in the agency and we are looking for a social media manager.What we want to do more and more is participate in as many regional pitches as possible, and try to win them. otilia.haraga@business-review.ro

ith the government having included a handful of new taxes in next year’s budget, investors’ associations have warned the state to step up its efforts to combat tax evasion and refrain from increasing the fiscal burden for honest taxpayers.

Policymakers argued the new taxes would cover the current gap in budget revenues, which hovers around EUR 700 million.

However, the business environment was angered by the manner in which the new fiscal initiatives were approved, without prior consultation of the private sector. Business associations believe the unstable legal and framework is one the key factors that dents Romania’s competitiveness.

“The lack of predictability and consultation when setting new taxes will lead FIC members to reconsider their position on the local market and redirect present and future investment towards jurisdictions which offer a satisfying level of fiscal stability, at least in the medium and short term,” said the For-

Anxiety a-tax: business associations are concerned that fiscal evasion will increase following the adoption of new taxes

“Along with the increased taxation already enforced without prior, transparent consultations with the business community, such decisions only lead to an unprecedented rise in the past 20 years of the fiscal burden for the Romanian taxpayers,” AmCham Romania. eign Investors’ Council (FIC), the business It is clear that we will see an increasing advocacy group comprising 119 multi- number of insolvencies in the coming national members with cumulated in- period,” Constantin Coman, country vestments of around EUR 35 billion in manager of Coface Romania, told BR. He commented that all the new taxes Romania.

The government will tax all special will ultimately have to be paid by Roconstructions, including power grids and telecom towers, and expects to raise around EUR 100 million yearly. Pegging the excises to the inflation rate and enforcing a new EUR 0.7 excise for each liter of sold fuel will send another EUR 739 million into the state coffers.

The fresh revenue will be used to finance large infrastructure projects, according to the government. In addition, royalties for all mineral resources excluding oil and gas will be hiked by 25 percent.

The Romanian Association of Romanian Businesspeople (AOAR) has found it hard to understand why the manian consumers, through higher government would finance infrastructure prices for transport and other products.

The business advocacy group Amworks from the collected excises, when there are still a lot of EU funds available Cham Romania said the new taxes would “lead to a rise in the fiscal burden for Roin this field.

“This is an additional burden on com- manian taxpayers that is unprecedented panies who must pay additional excises. in the past 20 years.” The group has

over 350 members that are US, international and local companies, with total investments worth over USD 10 billion.

AmCham warned the new taxes would increase tax evasion, lead to a reduction in investments and destroy jobs. PM Victor Ponta said he would meet the advocacy groups, adding that Romania could not be an El Dorado when it comes to taxation.

“We have the lowest taxation, except Bulgaria. Forgive me, but I am responsible for the citizens of this nation. What should I do? Cut pensions and wages?

Close hospitals as was done in 2010? I think this is wrong,” said Ponta, quoted

by Mediafax newswire.

He added that the new taxes had

“The lack of predictability and consultation when setting new taxes will lead FIC members to reconsider their position on the local market and redirect present and future investment towards jurisdictions which offer a satisfying level of fiscal stability, at least in the medium and short term,” Foreign Investors’ Council. been negotiated with international lenders, as part of a EUR 4 billion standby agreement.

The PM claimed that both AmCham and the FIC supported the loan deal. ∫ Ovidiu Posirca

www.business-review.ro Business Review | November 18 - 24, 2013

NEWS 5

HUMAN RESOURCES

Foreign companies take initiative in youth training

WHO’S NEWS

F

Kim Koellner

oreign industrial players are embarking on a long-term project of preparing a new generation of technicians, working with local authorities on bridging the gap between formal education and market demands.

Representatives of Austrian, German and French investors have taken the initiative and supported the opening of professional schools in Romania, mainly in central and western Romania.

“In 2006, the industrial units started to look closely at the efficiency of their employees, as wages had started going up,” said Radu Merica, president of the Romanian-German Chamber of Commerce and Industry (AHK Romania), during a meeting on technical education in Romania.

Stelian Fedorca, counselor at the Ministry of Education, said firms realized the average age of technical staff in Romania was about 50, because the country had reformed the education system in the early 90s, scrapping practical training.

The Education Ministry wants a percentage of high-school students to enroll in a two-year training program, involving significant practice in industrial plants.

They say this will reduce youth unemployment and alleviate poverty. Students

receive a monthly scholarship of RON 400, the payment of which is split equally between the state and the employer.

Polipol, a German furniture maker, is currently training 12 high-school students at its plant in north-western Romania in a dual system.

“Germany got through the crisis without any major issues because there are small and medium-sized enterprises that hire people through the dual education system,” said Lorin Arz, counselor to the general manager at Polipol Satu Mare.

Dan Brumboiu, general manager of the firm, says it plans to increase the headcount to 1,000 people in the next two years, adding that the current trainees will be offered full employment opportunities at completion of their traineeships.

A handful of companies including car parts maker Continental and woodbased panel producer Kronospan support the Kronostadt German Technical School in Brasov, which can train up to 250 students. According to Fedorca, around 12,500 are currently enrolled in technical high schools, out of a total of 20,000 places. ∫ Ovidiu Posirca

BR welcomes information for Who’s News. Submissions may be edited for length and clarity.Get in touch at simona.bazavan@business-review.ro has been appointed the new CEO of Domo Retail by the company’s administration board. The South Korean is replacing Dragos Dinu, who managed the company during the transition process, and will be focusing on personal projects.

Koellner has over ten years of experience in retail on markets in France, Germany and Romania. He was educated in Germany and the United States.

Cristina Fundoianu

has joined Clifford Chance Badea as financial controller.

She had previously spent eight years as audit manager at BDO Audit. Fundoianu graduated from the Academy of Economic Studies in Bucharest (2005) and ACCA (2010).

Hortensia Dumitriu

is the new director of the environment and climate change department of KDF Energy. She began her career as a physics professor. In 2004 she joined the National Environmental Protection Agency, where between 2006 and 2008 she worked as head of the atmosphere protection and climate change department.

Helen Tomlinson

has been appointed general manager of GSK Consumer Healthcare for Romania and the Adriatic countries.

Tomlinson, 36, joined GSK Nutritional Healthcare in 2006, as category controller for out-of-home in Great Britain and Ireland. She later held various sales positions and between 2011 and 2013 she worked as channel director. Prior to joining the pharma company, Tomlinson accumulated ten years of professional experience in sales and marketing in the British food industry.

www.business-review.eu Business Review | November 18 - 24, 2013

6 INTERVIEW

IAA Global to expand scope to new countries Felix Tataru, senior vice-president of the International Advertising Association (IAA) Global since June and founder of the GMP communication group, which numbers seven agencies, plans to expand the footprint of the association to Brazil, Argentina and Germany, he tells BR. Tataru, who recently became the first Romanian to receive the IAA Champion accolade, will become chairman and global president of the association by default in 2016. skills. This strategy is applied by other agencies in Great Britain, Germany and the United States. If we look at the communication mix, TV remains the same, and the rest of the channels are going down; only digital is growing. To align to this trend, next year the IAA will kick off the digital module of the IAA School because there is a great need for digital specialists.

∫ OTILIA HARAGA

How do you see the development of the GMP group?

My plan is to leave the position of general manager of GMP Advertising and remain just president of the group, to collaborate more closely with each partner, and work more on integration and the synergies between the agencies. Andreea Nemens, who is now my right hand, will take over the management of GMP Advertising and I will remain only president of the group. I don’t know when this will happen exactly, because it is her first year as ex-

CV Felix Tataru • 2016 to become chairman and president of IAA Global • June 2013 - present senior vice-president of IAA Global • 2006-2011 president of IAA Romania • 2008 - present vice-president for Communication and Young Professionals in the IAA Global board • president & founder of GMP Group • GM of GMP Advertising

ecutive director, so it could take another year or two.

Are you interested in further acquisitions or ventures?

I never exclude anything because I like to explore. If you look at the way the group has evolved lately, you’ll see that Luna used to be an independent agency and we partnered Claudiu Leonte, and for the past year it has been part of GMP. At the start of last year, we founded Chapter 4 Communications from scratch and, going back, Point Public Affairs also started from scratch in 2008. But, whether I want to start from zero or via a partnership, I need to free myself from the workload at GMP Advertising.

What is the current shareholding structure of the group’s agencies?

I am major shareholder in all the agencies of the group, but the number of shares varies. For instance, I have a full package in GMP Advertising, while in others I have 51 percent. In May 2013, Ana Maria Diceanu, business development manager at GMP PR, became senior partner in the agency. She has worked with me and Ioana Manoiu for the past seven years. I have more than 50 percent of shares in GMP PR, and

Photo: Mihai Constantineanu

What priorities do you have for the remainder of your term as senior VP of IAA Global?

One thing which is on the president’s agenda, and I support, relates to the IAA World Congress. It is currently held once every two years, but we believe that the industry is too dynamic to wait that long, so we want to have it once a year. Next year it will be in Beijing.

Secondly, our focus is for the IAA to be represented as well as possible in key countries. We are not pleased that the IAA still does not exist in some countries. My targets are Latin American nations such as Brazil and Argentina. Brazil is very important, both because it is an emerging country, but also because agencies from Brazil have been ranking top for creativity at Cannes in recent years, so we cannot afford not to be there. Another country is Germany, where we have a very atypical situation: there is no other global association there because they are organized by lands and their civic participation is so high that there are tens, if not hundreds, of associations of all types.

In 2008, when I began my term as global VP of Young Professionals, which includes about 1,000 young people up to 35 years old from a total of nearly 5,000, there were around 10 branches, and when I ended it, there were around 15. We will also keep on developing in this direction.

Last but not least, IAA Romania and IAA Austria will create an online hub where young professionals can share content. The content will be gathered, structured and put online from Bucharest.

the two of them are minor shareholders. Ioana is in charge of the management and is the administrator of the company while Ana is junior partner.

Will you recruit for new positions in the group?

First of all, we are trying to recruit a PR director for GMP Group, who should communicate for all the agencies in the group. At Webstyler we have about 45 people, and at GMP Advertising there are nearly 50. At GMP PR, there were about 25 people, at Luna there are about 15, and at Point Public Affairs about 10. Overall, there are 150 people working for the group.

At GMP Advertising, we plan to hire people for two digital positions, someone to bring know-how to the teams.

For instance, we need an art director with digital skills to help everybody grow, and someone on strategy as well.

What are you planning in digital development for the group?

Our approach to digital is that we have a specialized physician, Webstyler, and two general doctors – GMP Advertising and GMP PR. As a brand agency, you cannot afford not to understand all the communication outlets. Everyone at GMP Advertising will grow on digital

What are your plans for Radio Itsy Bitsy?

The National Audio-Visual Council (CNA) will organize a public tender to allocate frequencies. It is hard to survive for lack of proper coverage: we now cover half of the country, which is not enough. Most radio channels cover 70-80 percent of the country. We want to expand our coverage.

Moreover, Itsy Bitsy is still perceived by most people as a radio station exclusively for children, but our research has shown that more adults are listening than children, most of them mothers, who are mainly responsible for household expenses. Our positioning as a radio station for children was very strong. Soon, we will have a campaign coming out to change that and show it’s also for the parents. According to the latest D&D Research survey, more than 1.4 million parents and kids are listening to our radio daily.

Next year there will be presidential elections in Romania. Do you plan to get involved?

It is too early to say. I have been contacted a few times but it is still not known who the candidates will be.

Anyway, I have never known clearly that I will work on such a project a year before. There were cases when discussions started just two months beforehand. Moreover, when you work with a candidate, you have to share their beliefs and values, there has to be chemistry, and some things may not work out. I have been in a situation in which I had to decline the invitation because we were not on the same wavelength.

Last year’s local elections were the first time when we did not want in; we were called but we did not feel represented by Mr. Prigoana. But I gave some pro bono advice to Nicusor Dan, who was the great revelation of the campaign. otilia.haraga@business-review.ro

www.business-review.eu Business Review | November 18 - 24, 2013

8 MONEY

Government explores banks’ involvement in EU funds management With EUR 43 billion of EU funds allotted over the 2014-2020 period, the government is seeking greater involvement by the banking system to sustain gains in the absorption of EU funds. when a project is approved there is the certainty that it is bankable,” Radu Gratian Ghetea, the association’s president, said during the same seminar.

∫ OVIDIU POSIRCA Eugen Teodorovici, minister of EU funds, suggested the country would be able to reach an absorption rate of about 30 percent by year end, after the European Commission, the executive arm of the EU, unblocked payments in all operational programs.

According to the Ministry of EU funds (MEF), around EUR 4.7 billion of EU funds have been reimbursed to date, taking the absorption rate close to 25 percent by October.

“Simplification is essential and if we are not able to do it, the absorption will not exceed 30 percent,” said Maria Grapini, delegate minister for SMEs, the business environment and tourism, during an economic policy seminar last week.

She added that the business environment has to regain trust for projects to be submitted. The minister says the reimbursement delays caused losses to some companies that had sought EU money to develop their businesses.

Delays occurred after the EC started to block payments in some operational programs last year, due to allegations of fraud in projects implemented between 2009 and 2011. EU experts cited faulty procurement procedures and the mismanagement of EU money. Romania will suffer EUR 1 billion in financial corrections for the irregularities.

Teodorovici says the current system

Private specialists remain involved in projects

Banking on help: the government wants lenders to play a key role in the absorption of EU funds

is fully compliant with the EC request, which triggered the commission’s decision to unlock all the payments last month.

Banks in project assessment As Romania has the worst absorption rate in the EU, the MEF is currently discussing initiatives to enhance performance in this field with lenders.

“Banks should have the payment function, so that once the payment ticket is issued in the system, the bank or group of banks selected for this function transfer the funds into the account of the contractor,” Teodorovici told BR. He added that banks could step in to cover payments for a certain period, if

there is a funding gap from the state.

The minister says the pre-financing lines provided by the EC in the first years of the new budget could be used by banks to grant financing lines to beneficiaries, including the private sector.

In addition, banks could handle project calls and oversee the implementation period of EU-funded projects, similar to what was done in the pre-accession period, according to Teodorovici.The MEF is currently working with the Association of Romanian Banks (ARB) on the structure of the public acquisition for this project.

“A proposal by the ARB is for banks to get involved in the authorization process of EU-funded projects, so that

Bringing in private specialists was one of the urgent measures taken by the MEF this summer to improve the absorption of EU funds. The government hired 39 recruitment companies on a EUR 7.7 million contract to scour the market for specialized staff.

Teodorovici says the private specialists have evaluated the backlog of projects and that the financing contract for eligible projects will be signed this month.

The minister says the involvement of the private sector has paid off, adding that Romania attracted more funds this year than during the 2007-2012 period.

“I hope to relaunch a new framework agreement soon to ensure the same technical support from the market for the coming years,” stated Teodorovici, The government can use all the help it can get, given that Romania has to spend around EUR 5.5 billion next year in EU funds, to prevent automatic decommittments. This would be done under the n+3 rule, which has been applied this year to Romania and Slovakia, giving them more time to spend cohesion funds. ovidiu.posirca@business-review.ro

Banks remain risk averse Although the central bank recently cut the key interest rate to a record low of 4 percent, banks are keeping their stringent risk policies in place, slightly reducing the cost of bank loans. ∫ OVIDIU POSIRCA Radu Gratian Ghetea, president of the Association of Romanian Banks (ARB), said last week the banking system had put aside EUR 10 billion in provisions by September. He claimed this amount should have been seen in banks’ profits.

The president added that 85.8 percent of the non-performing loans in the banking system are generated by insolvencies and bankruptcies.

“The insolvency law is a big problem. Many clients, instructed by very good lawyers and insolvency specialists, delay the process and banks still

have their money stuck in there,” said Banks keep on lending to Ghetea.

SMEs He says that against this backdrop, Valentin Lazea, chief economist at the banks will continue to maintain National Bank of Romania (NBR), said their current risk margins through to the banking sector has engaged in 2014. “atypical behavior” since the start of Central bank governor Mugur Is- the year. “We have seen an abnormal arescu suggested earlier this month increase in bank loans to small and that banks should lower loan interest micro-enterprises, while the stock for rates because all their indicators, in- middle-sized companies and corpocluding profitability and solvency, de- rates has decreased,” said Lazea. pend on the volume of loans.

“One potential explanation is that “If banks do not want to grant loans, the larger companies are finding alterthey can put up the shutters. (...) native financing sources to bank Bankers need to find revenues (…) loans.”

They need to return to their basic According to the NBR, around 60 function of lending,” said the gover- percent of the loans provided to SMEs nor. are granted by local banks. Non-resi-

dent lenders, meanwhile, account for 30 percent of total financing, while non-banking institutions cover the remaining financing.

Ghetea said that lending to SMEs had picked up in the past two years, adding that 40 percent of the total loan stock of RON 50 billion is allotted to the segment.

Although banks claim they are focusing on SMEs, Maria Grapini, delegate minister for the business environment and tourism, said that the companies she had spoken to across Romania told her access to finance is their biggest challenge. ovidiu.posirca@business-review.ro

www.business-review.ro Business Review | November 18 - 24, 2013

Technology storms local banking system Fatih Arpas, director of alternative delivery channels & IT at GarantiBank, says the lender is looking to further enhance its internet banking system and alternative payment platforms due to a highly responsive local market.

∫ OVIDIU POSIRCA Are Romanians early adopters of alternative banking platforms?

In the past, Romanians were reluctant to use such platforms, but in recent years they have started to be more and more interested in them, as dynamism and mobility are nowadays the key words in everybody’s daily life. People choose solutions that allow them to move fast and meet their needs.

Romania is taking advantage of its high internet connectivity, ranking fifth in the world in terms of internet speed. Also, the public is getting more and more eager to have smart phones – the market is expecting to register sales of approximately 1.5 million smart phones by the end of 2013.

These give people non-stop access to their bank accounts and translate into greater comfort for the customers.

There is no doubt that technology is taking the Romanian banking area by storm as well.

How do you decide what technologies to implement on the local market?

As technology evolves and the urban lifestyle tries to avoid time-consuming processes, banking transactions and commerce will be carried to another level. Social media usage is still on the rise and banks will soon be learning to connect social profiles with banking profiles. So, we will see more and more new e-commerce sites, and mobile phones and tablets will

spread to more households.

We benefit from the full support of our mother bank, Turkiye Garanti Bankasi (TGB), the most profitable and the second largest private bank in Turkey, in terms of assets. We also have a specialized company, Garanti Technology, in Turkey, which has launched some of the most innovative financial products recognized and awarded globally. Some of them have already been made available here in Romania, for all business segments, such as: the first contactless payment system in Romania, the first credit card with chip – Bonus Card; the widest network of smart ATMs in the country – over 260, iLoanU – the first online real-time loan application; and Garanti Online, probably the most secure and advanced internet banking system in Romania. And in October, GarantiBank, in partnership with Seamless, debuted another innovation on the market – SEQR, a simple, fast and safe mobile payment solution.

Are new banking technologies posing additional challenges from the vantage point of data security?

For sure, and this is exactly why we are constantly investing in technology, in order to continue providing our customers with the safety that they are already used to when using our products and services.

Does GarantiBank plan to roll out new banking technologies next year?

Innovation is part of our DNA and we will continue to build on it in the coming years, as a main differentiator in the market, focusing on innovative products, as well as high quality customer service.

In 2014 we are planning some developments in our internet banking service – Garanti Online – introducing new menus, in order to continue offering our users the best online banking experience and remain a top performer in Romania. The list will continue with innovative projects, which will be announced at the right time.

We will continue to stay close to our customers, offering competitive products and services, tailored to their needs. ovidiu.posirca@business-review.ro

MONEY 9

www.business-review.eu Business Review | November 18 - 24, 2013

10 CONSTRUCTIONS

Local cement market wobbles through lack of real estate investments The Romanian cement market will drop by between 3 and 5 percent in 2013 as both residential and non-residential constructions stall. No growth perspectives are so far in sight for 2014, and should the industry lose its access to the EU’s free CO2 allowances scheme, the economic viability of doing business in Romania will come under threat, warn manufacturers. ∫ SIMONA BAZAVAN “In 2011 and 2012 we had a boost from infrastructure projects such as Corridor IV works, and we continued to benefit from some of these projects in 2013, but we do not see any infrastructure projects of significant size that would drive demand next year,” said Daniel Bach, CEO of Holcim Romania, last week.

Alongside Carpatcement Holding and Lafarge Romania, the company is one of the main suppliers on the Romanian cement market.

Existing infrastructure projects were not enough to drive up the local cement market in 2013 either. Factoring in that the number of building permit applications for residential and non-residential buildings will fall again in 2013 as they have since the beginning of the crisis, Bach estimates that the local cement market will decrease by between 3 and 5 percent in volume. This means another year of decline after the market shrank by 0.2 percent in 2012 on 2011.

Earlier this year, cement manufacturers were hoping that the market would at least stagnate, but this has failed to happen. “I don’t think the Romanian construction market will ever again see annual increases of 7-9 percent like those posted over 2005-2008.

But I am confident that a moderate yet stable and constant growth rate of about 1-2 percent per year is achievable,” Florian Aldea, general director and president of the board of directors at Carpatcement Holding, said in May. Judging from how things are looking at present, growth perspectives lie beyond 2014. “I would expect 2014 to be similar to this year in terms of activity. We don’t assume a further drop but we believe that the risk of decline is probably slightly higher than the possibility of growth,” added Bach.

Any positive impact could come from the non-residential sector, such as the development of industrial projects and logistics centers, but here too there is no certainty, as demand for this is fueled by export activities, which in turn depend on the economic evolution of Western Europe, Romania’s main export market.

Daniel Bach CEO of Holcim Romania

(EU) drop the free CO2 allowances scheme for cement producers, the market will come under considerable strain, thinks Holcim Romania’s CEO. Industrial players in the EU have to buy certificates in order to emit CO2. At present, a number of industries, including cement producers, which are at risk of suffering a competitive disadvantage in relation to imports, get free certificates. EU authorities are presently reconsidering the list of industries to benefit from this between 2014 and 2020, and should cement producers have to pay for CO2 emission certificates their competitiveness will be driven down, said Bach, stressing the need for the local authorities to support their position in Brussels.

Cement imports already represent about 10 percent of the market, but this could go up even further, he warned.

Local producers will see increased competition from producers in Turkey, Ukraine and Russia, who don’t have to bear such costs.

The continuation of the free CO2 allowances scheme is vital, stressed Mihai Rohan, president of CIROM, the Romanian cement producers association.

“Otherwise we will build our infrastrucFall in free CO2 allowances ture using Ukrainian cement,” he said.

The drop in free CO2 certificates is spells disaster Even if the economic situation turns not the only energy related issue Holaround, should the European Union cim has faced. Last week, the company

Clean energy: Holcim Romania has invested EUR 15 million in a waste heat recovery installation for its factory in Alesd, north-west Romania.

opened a EUR 15 million waste heat recovery installation for its factory in Alesd, north-west Romania. The investment will be recovered in ten years, forecasts the firm.

The installation produces electricity using the gases resulting from the cement production process, and will generate about 15 percent of the electricity the factory uses. It is the first of this kind in Eastern Europe, said Bach.

“There is an opinion that we should buy green certificates for the energy we produce in this installation, when it should be the opposite. Of all the green energy, what we produce is the greenest.

We don’t see why we should be punished by having to buy green certificates for the energy we produce. I think they simply forgot to include this in the law,” said Bach.

Another local cement factory will open a similar installation, but if the authorities require producers to buy green certificates for the electrical energy they produce, there will be no incentive for them to make similar investments, added Rohan.

Dropping numbers Holcim Romania will see its sales fall for a second consecutive year. This will be in line with the general 3-5 percent con-

traction of the cement market, said Bach. The company has increased prices this year (by 2-3 percent) but this will most likely not offset the drop in volumes, he added. On the other hand, Holcim says it will return to a similar profit level to the one reported in 2011.

Last year Holcim Romania made a EUR 8.5 million loss, but much of this was generated by several write-offs, added the CEO. Last year’s sales brought EUR 213 in turnover, below the EUR 223 million reported in 2011 and considerably down on the EUR 372 million record level posted in 2008.

Holcim Romania owns two cement plants in Campulung and Alesd, a grinding station and a cement terminal in Turda, 16 ecological ready-mix plants, five aggregates plants, two special binders plants and a cement terminal in Bucharest. It employs around 1,000 people.

The factory in Alesd was built in 1969 and was bought by Swiss firm Holcim in 2000. Some EUR 178 million has since been invested in upgrading the plant. The company’s total investments in Romania amount to approximately EUR 700 million, making it the largest Swiss investor in the country. simona.bazavan@business-review.ro

www.business-review.ro Business Review | November 18 - 24, 2013

Bucharest office transactions take off but new developments stall In Q3 2013, office leasing volumes were the highest they had been over the last two years, but the overall volume of real estate transactions dropped 51 percent in the first three quarters to EUR 84 million, according to CBRE. ∫ SIMONA BAZAVAN Honeywell and Rompetrol leasing a combined 20,400 sqm in the Upground and City Gate office projects in Bucharest were the single most important office transactions in the third quarter of this year. This pushed the total volume of leasing transactions in Q3 2013 to 84,500 sqm, which meant an increase of 25 percent on the previous quarter and a whopping 223 percent rise on Q3 2012, according to a recent CBRE report.

The growth is welcome news for market players, yet the structure of leasing activity shows that the renewal and renegotiation of existing contracts still retain a dominant role. This amounted to 49 percent of total leased areas while take-up accounted for just 51 percent of the total leased area, slightly less than the previous quarters, according to CBRE data.

Renewals and renegotiations will go up slightly over the next period but in line with this year’s average, Razvan Iorgu, managing director of CBRE Romania, told BR. “In 2014 we can expect to see more consistent pre-leases than in 2013, considering that a number of high-quality office projects will be delivered, which will be very attractive to tenants,” he said.

Five pre-lease deals of an average of 1,000 sqm were signed in Q3, all of which are for buildings currently under construction. However, even with these signed transactions there is not a trend of pre-lease activity in the market, with only 8,700 sqm transacted since the start of the year, said CBRE representatives.

Where does demand come from?

“In general there is growing demand from tenants in two different surface

Bucharest office market in numbers Total stock 2.1 million sqm Leasing activity (Q3 2013) 84,500 sqm, up 25% q-o-q Completions (Q3 2013) 1,800 sqm, down 85% q-o-q Vacancy rate 15.4% Prime headline rent EUR 18/sqm/month

segments: medium-size tenants looking for areas under 1,000 sqm, and large or extra-large tenants interested in over 4,000 sqm. We expect the market to continue to be polarized between these tenant segments,” said Iorgu.

Romania trails the region for new investments Romanian real estate is nowhere close to getting out of the woods, CBRE data show. Poland and Russia were the main destinations for real estate investors in Central and Eastern Europe (CEE) in the first nine months of 2013, while Romania and Ukraine were the only two countries in the region to report lower real estate transaction values. Only two transactions worth EUR 84 million were closed on the local market in the first nine months of 2013. This was down 51 percent y-o-y. Out of EUR 84 million, office represented 76 percent compared with about 48 percent last year. Even so, there was an overall drop y-o-y.

While Romania reported fewer transactions, in the CEE region real estate transactions totaled EUR 6.8 billion, up 47 percent y-o-y. Most of these deals were signed in Russia (EUR 3.6 billion, up 41 percent y-o-y), followed by Poland (close to EUR 2 billion, up 81 percent y-o-y).

Who’s building?

Only one office building was delivered in this last quarter – an 1,800-sqm property located in the central submarket.

The last quarter of 2014 should see the opening of three major projects: Floreasca Park, City Offices and Hermes BC, which comprise a total of 82,300 sqm.

This will represent about half of the 168,500 sqm of new office space to be delivered this year, according to CBRE. Five more office projects have been announced for 2014, which will add another 78,000 sqm to the market – Metropolis Bravo, AFI Park 2 & 3, Green Gate and Skanska’s Green Court Bucharest, with “a substantial prelease”, says CBRE. Some 184,000 sqm of office space is under construction in Bucharest and due to be delivered over Q4 2013-Q2 2015, and at least another 600,000 sqm is in various stages of development.

An average of 167,000 sqm of office space has been delivered each year in Bucharest over recent years. simona.bazavan@business-review.ro

PROPERTY 11

www.business-review.eu Business Review | November 18 - 24, 2013

12 ART MARKET

Rosy picture for local art auction market With local buyers displaying a preference for mid-market works of art, the local industry reached EUR 25 million in 2012. BR took a peek under the hammer and found out the Romanian art sector’s perspectives for growth.

OANA VASILIU Since the first local auction house, Alis, opened in 1990, with small presentations on the walls of the National Theatre, Romania’s art market has grown significantly, reaching EUR 25 million in 2012 and simultaneously holding auctions in two countries, according to an Artmark report.

The Romanian art scene has two major components that can be monetized by specialists in the domain, says Dan Tudor, coordinator of Tudor -Art: the formal art market, where works are bought and sold in the public system, and tax paid, and the informal art market, where pieces change hands off the books. In Artmark’a report, the EUR 25 million figure includes the informal art market.

Judging by the number of art auctions held this year, it would seem that Romania is starting to develop a scene. Artmark research found a slowdown in the growth of artists’ asking prices, while the local public tends to buy art objects with medium prices (EUR 1,000-5,000), with great potential to rise in the near future.

Moreover, there is an interest in emerging, postmodern and contemporary art, all evolving from one auction to the next.

Compared to countries with a long tradition in organizing art auctions, such as France, the UK and the US, the art auction market in Romania is very small. Regionally speaking, it is smaller than the Hungarian one and slightly bigger than the art market in Slovakia, says Tudor. “But eastern countries do not appear in the formal analysis of the international art market. This is partly due to low investment in this area, and also to artistic management deficiencies and marketing policies,” he added. Despite these issues, the report released by Tudor Art found that 201 new artists sold items at auctions in 2012.

The Romanian market is in line with the international trend of buying contemporary art, with a sale rate of 92 percent for this sector, 60 percentage points more than in the same period of 2012. The newcomers putting pieces under the hammer were Andrei Cadere (who sold works for EUR 22,000), Gili Mocanu (EUR 11,000),

Romanian painter Nicolae Tonitza (self portrait) was top favorite on auction in 2012, with EUR 1.4 million total value of the pieces auctioned.

Victor Brauner (EUR 120,000) and Ion Tuculescu (EUR 70,000).

Additionally, in September, Romanian collector and antiquarian Stefan Grimberg opened a new art gallery, which also operates as an auction house, in Bucharest. The estimated auction fund will amount to EUR 5 million, including valuable works from collectors who have used the Grimberg Auction House for over 20 years. The new auction house is expected to hold its first session by the end of the year.

2012 trends In 2012, the biggest winners were heritage artists, whose works were on sale for reasonable sums, with start-

ing prices under EUR 1,000. For example, Seduced (Sedusa) a painting

by Misu Teisanu, had a starting price of EUR 250 but sold for EUR 10,000.

Furthermore, contemporary art started to gain ground and come up for auction more often, 2013 research has shown. The classics and inter-war painters remained popular in 2012, thanks to their more accessible prices than those for other artists.

Important values conveyed in this market began to capture the attention of traditional investors, with dedicated market tools, facilitating access to the art market investment vehicles such as art investing funds. 2012 was the second year of the Certinvest Romanian Art Fund, which has managed to raise a total of over EUR 2 million.

Artmark also had its own premieres, with two simultaneous auction events: Bucharest-Chisinau (June 2012, raising EUR 1.34 million) and Constanta-Monte Carlo (July 2012, over EUR 900,000).

2011 is considered a historic year in terms of Romanian art transactions, with paintings sold for over EUR 200,000. The most expensive work of art was In Bedroom (In iatac), by the famous artist Nicolae Tonitza, which went for EUR 290,000. Another Tonitza work was the first to sell for six figures, when Girl with Pink Ribbon (Fetita cu funda roz) went for EUR 120,000 in 2009.

In 2011 the public expressed enthusiasm for impressionism and postimpressionism works, sales of

Romanian auction houses ALIS – Bucharest Contact: www.alis.ro phone: +(4021) 311.20.14 ANDREAS – Timisoara Contact: www.andreasantic.ro phone: +(40256) 43.47.70 ANNART – Bucharest Contact: www.annartgallery.ro phone: +(4031) 437.95.33 ARA ART –Bucharest Contact: www.araart.ro phone: 0729.082.441 ARTMARK –Bucharest Contact: www.artmark.ro phone: +(4021) 210.30.15

GALERIA QUADRO - Cluj Napoca Contact: www.galeriaquadro.ro phone: +(40264) 43.11.05 GOLDART – Bucharest Contact: www.goldart.ro phone: +(4021) 314.98.23 GRIMBERG –Bucharest Contact: www.grimberg.ro phone: +(4031) 432.92.68 MONAVISSA- Bucharest Contact: www.monavissa.ro phone: +(4021) 318.46.40 PAL GALLERY –Miercurea Ciuc Contact: www.palgallery.ro phone: +(4074) 366.51.62

www.business-review.eu Business Review | November 18 - 24, 2013

ART MARKET 13 Top Romanian artists on auction in 2012*

Courtesy of Pace Gallery

USD 350.000 This year, contemporary artist Adrian Ghenie sold “Persian miniature”, oil on canvas, 300 x 290 cm, for USD 350.000 in an auction that took place at Pace Gallery, New York City.

which posted growth of 59 percent on a New York gallery in 2013, while an 2010, according to Artmark reports, Alexandra Nechita work reached EUR while painting remained the top 16,500 at an auction in France, in 2011.

“Ghenie enjoys exceptional managegenre. ment exclusively by foreign galleries, Contemporary vs. classic while Nechita is a prodigy, with a great communication team behind artists Asked by BR how contemporary her,” added Tudor.

Nowadays, living artists account artists sell in comparison with traditional ones, Dan Tudor answered that for 25 percent of auctioned items in just a few had so far managed to be- Romania, but the sale rate remains come famous enough to be sold at low. The total number of artists auction. These artists have interesting whose works went up for auction was rates, quite close to those of their gen- 1,332 in 2012, of whom 770 sold pieces. eration in other international cultural Of the 562 who failed to sell at auction, markets. For example, an Adrian Ghe- many are recent artists whose style is nie piece was sold for USD 350,000 in not yet mature.

EUR 290.000

Courtesy of Artmark

The most expensive painting ever sold on auction in Romania Nicolae Tonitza, “In iatac” (In bedroom), oil on canvas, 100 x 69 cm, signed upper right, in dark, Tonitza, by Artmark, for EUR 290.000 in December 2011.

oana.vasiliu@business-review.ro

Artist

Total value of the pieces auctioned (EUR)

Number of the pieces awarded

Yearly average yield**

Nicolae Tonitza Nicolae Grigorescu Gheorghe Petrascu Rudolf Schweitzer Cumpana Theodor Pallady Stefan Luchian Camil Ressu Corneliu Baba Alexandru Ciucurencu Nicolae Darascu

1.415.277 1.136.103 748.640 487.523

60 24 50 89

27.41% 28.19% 29.34% 17.78%

445.702 361.550 345.832 342.159 340.299 314.836

35 11 25 48 28 20

9.84% 58.91% 28.06% 42.73% 14.83% 24.59%

*According to Tudor-Art, independent index of Romanian art market ** Data collected from the Artmark Art Market Index

The value of awards between 2009-2012* Year

Total number of awards (EUR)

Average price for the work of art (EUR)

2009 2010 2011 2012

4.168.350 8.513.440 14.558.651 13.118.195

2.258 3.362 4.846 3.886

*according to Tudor-Art, independent index of Romanian art market

www.business-review.eu Business Review | November 18 - 24, 2013

14 IN TOUCH FILM REVIEW

DON’T MISS GAUDEAMUS BOOKFAIR

Ender’s Game

Photo: Silviu Pal

This year, the guests of honor at Gaudeamus are the Nordic countries: Sweden, Norway, Denmark, Finland and Iceland

∫ OANA VASILIU November 20-24 Romexpo Organized by Radio Romania since 1994, Gaudeamus International Book & Education Fair is held in the central pavilion of Romexpo, where an exhibition area of 14,000 sqm will play host to over 400 Romanian and foreign publishers, printing houses, educational institutions, cultural institutes and centers, book distributors, multimedia companies, bookstores, libraries and so on.

A book exhibition and a literary salon at the same time, the fair stages over 650 cultural events every year, in a fun atmosphere intended to celebrate the world of written culture.

This year, the guests of honor at Gaudeamus are the Nordic countries: Sweden, Norway, Denmark, Finland and Iceland.

To mark the event, the Nordic embassies in Bucharest are challenging young readers to try their luck in a contest of imagination based on the Nobel Prize. The competition involves writing a short text to answer the question, "What other domain do you think should be awarded and why?" Participants are invited to come and speak in support of their entry on Saturday, November 23.

The most inventive texts will win prizes. oana.vasiliu@business-review.ro

The survival of the world depends on the twelve-year old Ender

DEBBIE STOWE Director: Gavin Hood Starring: Asa Butterfield, Harrison Ford, Ben Kingsley, Viola Davis On at: Cinema City Cotroceni and Sun Plaza, Glendale Studio, Grand Cinema Digiplex, Holywood Multiplex, Movieplex, The Light It is a time of WAR! Just one man…

Well, just one boy, actually, because Ender, on whom the survival of our species depends, is only 12. More than a century hence, and Earth is fearful of another alien attack by the Formics.

A program has been started that finds child geniuses and grooms them to be ruthless military leaders. It sounds sinister, but it can’t be, because Harrison Ford is in charge and he has Viola Davis looking over his shoulder.

Their great hope is shy Ender, and there is a lot of Matrix-style talk about

FOUNDING EDITOR Bill Avery PUBLISHER Anca Ionita EDITOR-IN-CHIEF Simona Fodor JOURNALISTS Otilia Haraga - senior journalist, Simona Bazavan, Ovidiu Posirca, Oana Vasiliu COPY EDITOR Debbie Stowe PHOTO EDITOR: Mihai Constantineanu

ISSN No. 1453 - 729X

LAYOUT Beatrice Gheorghiu ART DIRECTOR Alexandru Oriean

ance is delivered with all the subtlety of a wallop over the head with a Save the Planet placard.

There is a mature performance by Asa Butterfield, with shades of Harry Potter and Haley Joel Osment, and the default gravitas brought by Ford and Davis as the good cop-bad cop duo debating how much responsibility should be placed on Ender’s young shoulders. Ben “call me Sir” Kingsley also pops up as a past master warrior who serves as Ender’s mentor.

The film has nothing new to say, and does not stand out among a slew of fairly recent sci-fi flicks with environmental themes, such as Avatar and Wall-E, while Hollywood’s latest forays into space, the likes of Oblivion and Gravity, are more interesting on that score. Teens looking for Harry Potter in the cosmos will be well served, though.

whether he is The One. But Ender s quickly rises through the ranks of Battle School, which is something like a space-based Hogwarts. The premise is science fiction, but the movie is essentially a teen drama, concerned with standard coming-of-age matters such as dealing with bullies, coming out of one’s shell and earning the acceptance of one’s peers.

There are some colorful supporting characters whom Ender rubs up the wrong way as he earns his spurs in Battle School, notably Nonso Asorie as an academy sergeant whose bark is worse than his bite, and Moises Arias as a diminutive commander who tries to sabotage Ender’s ascent.

Sci-fi films often tackle current issues, such as Minority Report with criminal profiling and The Matrix with free will. Ender’s Game’s cause is environmentalism and our relationship with the planet – and boy, don’t we know it. The film’s plea for toler-

debbie.stowe@business-review.ro

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