Business Review No. 40, November 1 - 7

NEW KOPEL HAS INVESTED EUR 6 MILLION IN AN OPEL SHOWROOM, P5 FOCUS

BALANCE

INTERVIEW

With annual per capita consumption of nutritional supplements at EUR 4.7, the Romanian market hopes the future will bring robust health See pages 14-15

Culture vultures have an abundance of events to sate their highbrow appetites this fall. BR picks the cream of the crop of the cultural scene See pages 16-17

George Popescu, country manager of Amway Romania, talks to BR about his firm’s unusual style of distribution and the local market’s role See page 19

BUSINESS REVIEW www.business-review.ro

ROMANIA’S PREMIERE BUSINESS WEEKLY

NOVEMBER 1- 7, 2010 / VOLUME 14, NUMBER 40

DAM THE CONSEQUENCES

AGERPRES

The authorities are pressing ahead with plans to create two national energy companies, despite industry players’ warnings that the move could destroy competition, push up prices and deter foreign investment see pages 10-13

THIS WEEK

ACQUISITION OF THE WEEK Sebastian Ghita, owner of local IT&C group Asesoft, has become the new manager of Realitatea Catavencu media group, pouring an estimated five-year investment of EUR 75 million into the company. Sorin Ovidiu Vintu will remain a shareholder in the firm.

The takeover is meant to help the media group make the necessary efforts to switch to HD technology. Ghita has declared that he intends to develop the group regionally and that his new investment will be aimed at making a profit. Ghita, a 32-year-old businessman from Ploiesti, has an estimated fortune of EUR 35-38 million and has previously invested in the media, as he also owns Prahova TV, newspaper and radio station, as well as a news portal.

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LAURENTIU OBAE

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BUSINESS REVIEW / November 1 - 7, 2010

BUSINESS REVIEW EVENTS November 4

é Business Review organizes the

Russian Business Forum at Ramada Plaza Bucharest.

November 10

é Business Review organizes the

Fiscal Litigation event at Ramada Plaza Hotel.

November 17

é Business Review organizes the

Risk Management event at InterContinental Hotel.

For more information visit www.businessreview.ro/events 3

NEWS

Ugly scenes as 30,000 protest against cuts outside Parliament Palace

4

change in the public sector salary structure.

If passed, the latter will set an equitable framework for public wages for the coming year, the government says.

Union leaders have dubbed it illegal as it is built upon the 25 percent wage cut which should have expired at the end of the year.

At the end of September, President Traian Basescu predicted that the worst of the economic recession was over but that the peak of the social unrest was yet to come. More recently, the President said that the laying off of public workers must continue in order to reach the 70,000 target. He said that 27,000 public workers had been dismissed by August.

“We can no longer afford to pay salaries worth RON 43 billion, only RON 39 billion,” Basescu added. He said he doubted that Parliament would approve the wage bill and the government would most likely seek a confidence vote to get it adopted.

The President also predicted even bigger demonstrations in the coming weeks. “This is how the public sector re-

LAURENTIU OBAE

Scuffles took place between protestors and police as over 30,000 people demonstrated in front of the Parliament Palace in Bucharest last week while the no-confidence vote was being debated inside. Union members urged MPs to vote against the government, as they watched proceedings on two large screens erected in Constitution Square, according to Mediafax newswire. Union leaders had predicted that approximately 100,000 people would join the protest.

The trade unions marched from Victoriei Square to Parliament, led by leaders of the Social Democrat Party, including Victor Ponta (current PSD president) and Marian Vanghelie (Bucharest sector 5 mayor), one of the main opposition parties of the ruling PDL (the Democrat Liberal Party).

Over the past few months Victoriei Square and the headquarters of many ministries have been the scene of repeated demonstrations. Teachers, doctors, police officers and employees of the Ministry of Finance have voiced their opposition to the wage cuts, planned layoffs, lack of investments and planned

Protesters came to Bucharest to vent their frustration over public sector cuts

acts to reform. We have anticipated this.” The largest protest was expected to take place this Wednesday, when union leaders said over 80,000 people would protest in Bucharest as the government faced yet another no-confidence vote in Parliament.

Romania implemented a series of austerity measures during the summer, which included a 25 percent public sector wage cut, in order to reach the 4.4 percent budget deficit target agreed upon with the IMF under its EUR 20 billion aid package conditions.

The country currently has approximately 1.3 million public workers, which means that roughly one out of three Romanians is employed by the state. In spite of this high percentage, the quality of public services has often come under criticism.

Romania has an average of 1.9 doctors per 1,000 inhabitants, half the European figure, and also one of the lowest tax collection rates, at only 28 percent of GDP. Simona Bazavan and Otilia Haraga

BUSINESS REVIEW / November 1 - 7, 2010

NEWS

New Kopel invests EUR 6 million in Opel showroom Union Motors, part of New Kopel Group, has inaugurated an 800-sqm Opel showroom, service and car parts center in Bucharest, which required a total investment of EUR 6 million. The opening of the new showroom resulted from New Kopel’s purchase earlier this year of Ipso, a company specialized in the wholesale trade of cars and equipment.

“Although the Romanian car market is in recession, New Kopel

Group believes in its future, as well as in the Romanian economy in general. We are confident that this new partnership will be successful on both sides,” said Dudy Perri, New Kopel CEO. He predicted that 2011 would be a better year for the automotive market, as car fleets will need renewal since companies have been putting this off. The CEO said that no new dealerships would be opened for the moment, since the group is aiming to

focus on developing its current business. It expects a 20 percent increase in turnover this year, especially due to Union Motors’ Suzuki dealership.

The new Opel showroom will not make a notable contribution in 2010, due to the short time left until the end of the year.

The Opel dealership, which currently consists of a fleet of 2,000 Opel cars, will also be involved in the Rabla program, if it is continued in 2011. Union Motors’ Suzuki sales

through this year’s scrappage program represented almost 30 percent of sales so far. The newly opened showroom will continue to function as a service center for Dacia & Renault, as well as Opel. Perri added that Union Motors will provide a range of services through its new outlet for before, during and after the sale.Opel Romania’s country manager, Constantin Avromescu, was also present at the event.

Corina Dumitrescu

Orange Romania Q3 revenues fall 8.7 percent to EUR 246 mln Orange Romania posted total revenues of EUR 246 million for the third quarter of this year, an 8.7 percent decrease on the previous one.

The average revenue per user was EUR 83.3.

The telecom operator had 10,398,884 customers in Romania, having lost 2.8 percent of its users since the third quarter of 2009.

“In this quarter, while revenues from postpaid services continued to gain stability as we said previously, revenues from prepay services underwent a new decline due to the economic context. The global evolution of revenues on a comparative basis is similar to the one in the second quarter,” said Thierry Millet, CEO of Orange Romania.

The operator registered progress in its number of broadband clients, which went up by 35 percent on Q3, 2009, reaching a total of 3,024,257.

Romania is currently undergoing a rough patch for Orange by the standards of European countries.

Continent wide, third quarter revenues rose 1.5 percent to EUR 1.143 billion, a 0.9 point improvement from the second quarter (+0.6 percent). The increase was mainly due to Belgium, which saw a 7.9 percent growth in revenues in the third quarter, after they had risen 4.6 percent in the previous one. Revenues also improved in Switzerland and Moldova and continued to grow rapidly in Armenia.

“These favorable figures were partially offset by a slowing of the improvement in Romania due to deteriorating economic conditions,” says the report.

Otilia Haraga BUSINESS REVIEW / November 1 - 7, 2010

5

NEWS

BCR increases operating profit by 3.6 percent in first three quarters of 2010 Banca Comerciala Romana BCR has reported an operating profit of RON 2,304.4 million (EUR 548.4 million) in the first nine months of this year, up 3.6 percent year-onyear, based on continued revenue generation and cost control. The growth in operating income slowed, rising by RON 57.4 million or 1.6 percent compared to the same period of last year, and was combined with a decrease in operating expenses (down by RON 23.6 million or 1.9 percent y-o-y).

Net profit after taxes and minority interests amounted to RON 494.5 million (EUR 117.7 million), down by 29.3 percent at the end of September 2009, mainly caused by higher provision expenses due to the tough market conditions heavily impacting BCR’s customers and the OUG 50 implementation impact on fees.

BCR (the bank only) preserved its market share over the last year at around 22 percent in overall lending, due to a modest increase in housing

loans (+0.8 pp y/y) and stable position in the corporate segment. The bank is enjoying a strong liquidity, sound capital base and improved offering adapted to the current economic and competitive context. On the liabilities side BCR holds one fifth of customers’ deposits, based on competitive pricing and the strength of the BCR brand. Its retail business is self-funding, with its retail loan to deposits (LTD) ratio standing at around 84 percent, according to local standards.

“The positively managed operating result demonstrates BCR’s capability to respond to the difficult market conditions. We are taking a prudent approach to our risk positions as the economic environment remains tough. BCR is well equipped for successfully coming through this period and we will continue to provide support for our customers and look for ways to help Romania return to a growth path,” said Dominic Bruynseels, BCR CEO.

Government clings on after no-confidence motion fails

PM Emil Boc has lived to fight another day after the no-confidence motion was defeated

Prime Minister Emil Boc has survived yet another no-confidence motion brought by the Romanian opposition, the Social Democratic Party (PSD) and the National Liberal Party (PNL). Only 220 MPs cast ballots on Wednesday, 16 short of the 236 of 470 required for the vote to be binding.

The motion was initially filed in order to prevent the government from pursuing its announced austerity

plan, which includes a 25 percent cut in public wages, public sector layoffs, tax rises and controversial pension reform. “I understand the discontent and hardship, but our responsible policy is the right and sustainable path,” said Boc. During the debate, opposition lawmakers claimed that the government’s measures would only delay Romania’s recovery from the recession. About 30,000 union members protested in front of Parliament against the measures. After hearing the result, union leaders threatened a full-blown strike.

This is the fifth no-confidence vote brought by the opposition against the centrist democrat liberal government led by Emil Boc. So far, only one has been passed by Parliament, in October 2009. However, President Traian Basescu again nominated the head of the ruling Liberal Democratic Party (PDL), Emil Boc, as PM. Simona Bazavan

CallPoint launches a blog dedicated to the BPO industry On week 43, CallPoint has launched a new blog entitled “Multilingual BPO”. It’s an English blog dedicated to the community of business process outsourcing professionals around the globe – with an Eastern Europe approach. We have asked Grégoire Vigroux, one of the main blog authors, to describe the blog in more detail.

Who are the authors?

For the time being, the authors are top managers from CallPoint New Europe – we are a leading call center and BPO operator in Romania. But we will introduce external authors within the next 6 months, as it is important for us to draw on a wide range of industry experience and knowledge.

6

Why did you make a blog?

In both Romania and Bulgaria – where we have delivery centersthe BPO industry is a fast-moving business which is serving millions of clients across Europe and NorthAmerica. As BPO professionals working in this part of the world, we are in the middle of a booming industry, for which we have figures and interesting stories to tell. A blog is the best way to tell the story of this growth.

How the idea of starting a blog came up?

The idea of creating the blog

came up after many professionals asked us to provide some data and our views about the BPO and call center industries.

We have been frequently asked from Romanian journalists to provide about figures about the industry. As there is no BPO and call center professional association in Romania, journalists are consulting us frequently. Some of the last posts, such as “Romanian contact center industry: outstanding growth despite the crisis” and “Call center debt collection booms in Eastern Europe” give journalists some precise and relevant data which can be used for their articles.

Secondly, we want to answer frequently-asked questions from local and international clients, such as what are the multilingual capacities in Eastern Europe’s contact centers, or outsourcing for specific branches which are booming, such as ecommerce.

Why is your logo a bridge?

Bridges evoke themes of connecting people to new shores, where they can experience new cultures and communicate with new people. And these are precisely the values our blog intends to spread.

What would be your last words for our readers?

Well, I would suggest all Business Review readers who are professionally involved in the call center and BPO industry (both clients and providers, as well as journalists looking for journalistic contents) to visit www.multilingualbpo.com and subscribe, in order to receive the weekly posts.

I would also like to take this opportunity to invite them to leave some comments on the posts, as we want them to share professional their experience and knowledge with our readers.

ADVERTORIAL

Why did you choose to launch a blog outside of the CallPoint brand?

Our aim is not to use the blog

to promote CallPoint. We want to provide objective information about our industry and its trends.

For us, this is a matter of objectivity and credibility to remain neutral as much as we can. For this reason, we decided to create a separate domain and name.

BUSINESS REVIEW / November 1 - 7, 2010

CALENDAR / WHO’S NEWS

EVENTS, BUSINESS AND POLITICAL AGENDA NOVEMBER 1 é Eugen Voicu will announce during a press conference at InterContinental Hotel

the new strategy of Aviva Investors. By invitation only.

NOVEMBER é 11:40 The University of Bucharest, Premier Global and B.P.P organize the Life

Transition training program at the headquarters of the Law Faculty. Entrance is free for senior students of the University of Bucharest.

NOVEMBER 3 é 13:30 Part of the How to Web event, HTC launches the HTC Desire HD phone

at InterContinental Hotel. By invitation only. é 18:30 The Delice Cook & Fun culinary event takes place at World Trade Plaza.

By invitation only.

NOVEMBER 9 é Stoica & Asociatii organizes an event to celebrate 15 years since its founding at

Atenee Palace Hilton Hotel Bucharest. By invitation only.

NOVEMBER 9 – NOVEMBER 10 é The Ronewmedia 5.0 international conference takes place at Crystal Ballroom

& Events. By invitation only.

NOVEMBER 25 é TMF Romania organizes an event dedicated to Dutch investments in Romania.

BUSINESS REVIEW / November 1 - 7, 2010

WHO’S ADRIAN BAICUSI, general manager of Transelectrica, has stepped down from the position, according to company officials cited by Mediafax. He had served as GM of Romania’s state-owned power grid operator since January 2009 when he was appointed by Adriean Videanu, economy minister at that time. Previously, Baicusi was the CEO of Siemens Romania.

STEFAN BOTEZATU is joining Kinstellar law firm as partner. Having previously

NEWS served as partner in the local office of Gide Loyrette Nouel, the local specialist in energy and competition law, Botezatu has substantial experience in energy-related transactions, including in the electricity, district heating, natural gas and nuclear sectors, as well as in the implementation of renewable energy projects.

Business Review welcomes information for Who’s News from readers.

Submissions may be edited for length and clarity. Feel free to contact us at editorial@business-review.ro

Romania to resume growth in 2011, says IMF Romania will return to growth in 2011 despite media predictions that the country will endure a third consecutive year of recession, IMF representatives have said, estimating a GDP increase of approximately 1.5 percent. In 2009 the Romanian economy shrank 7.1 percent, and a further 1.9 percent drop is estimated for 2010. According to Mediafax, Jef-

frey Franks, head of the IMF mission to Bucharest, pronounced media estimations incorrect, saying that the fund doesn't forecast an economic decline for next year. The IMF’s review of Romania’s progress with regard to its EUR 13 billion standby loan will be made public on November 1.

Simona Bazavan

7

RUSSIAN INVESTMENT REVIEW

From Russia with investment promises This August Vimetco announced that it had signed a syndicated loan with the European Bank for Reconstruction and Development (EBRD) that refinanced most of the company’s existing debt. The EBRD will retain USD 75 million on its account, with USD 105 million to be syndicated to commercial banks.

“The EBRD facility offers Alro a good basis for continuing its development strategy by further consolidating its financing structure,” said Marian Nastase, vice-president of the Alro board, at that time.

Alro registered a net profit of RON 50.5 million (USD 16.9 million) in Q1 2010, compared to USD 8.3 million registered in Q1 of 2009. The company’s turnover for Q1 2010 was RON 414 million (USD 139 million) compared to USD 118.7 million in Q1 of last year.

Despite some high profile interests, Russia lies outside the top ten foreign investors to Romania in the official national statistics. Most major investors here have so far targeted fields such as heavy industry and energy. Recently,

LOCAL MARKET SEES NEWCOMERS

the newcomers have been LAURENTIU OBAE

smaller-scale companies in less traditional fields such as IT, and others are expected to join them.

Simona Bazavan The most consistent Russian investments in the local economy so far have targeted heavy industry, as due to its geographical position Romania serves as a gateway to EU markets. Plummeting steel and aluminium prices and shrinking demand both locally and internationally, however, have affected the balance sheets of local manufacturers, which have continued to post losses in 2010.

Such is the case with TMK. The Russian producer of steel pipes for the oil and gas industry operates in Romania through TMK-Artrom Slatina and TMK-Resita. TMKArtrom Slatina posted a EUR 15.13 8

Lukoil Romania may be looking to the first year of loss on the local market so far

million loss in the first semester, five times higher than the loss registered in the first semester of 2009.

Others have continued to expand on the local market. In April Russian mining and steel company Mechel said it had acquired Donau Commodities, which holds 90.91 percent of the shares of Laminorul Braila following an investment of approximately EUR 9.4 million.

“The acquisition of Laminorul Braila is one more step in the implementation of Mechel’s steel business development strategy, particularly aimed at increasing the share of high margin products in the group’s product portfolio. The plant produces downstream products from Mechel’s billets and increases synergies of all Romanian assets of the group,” said Victor Dyshlevich, CEO of the Eastern European steel division, at that time.

Mechel’s Eastern European steel division, set up in October 2008,

consists of the company’s four Romanian steel plants: Mechel Targoviste, Mechel Campia Turzii, Ductil Steel Buzau, Otelu Rosu and Mechel Targoviste. Mechel Targoviste ended 2009 with a EUR 125 million turnover and reported a EUR 24 million loss. In the first semester of 2010 the steel plant increased its turnover by 57 percent against the same period of 2009, amounting to RON 374 million (approximately EUR 88 million).

The firm managed to reduce financial half year losses to RON 48.26 million (EUR 11.4 million) as incomes doubled to RON 428.85 million (approximately EUR 100 million).

Elsewhere, aluminum producer Alro Slatina , the local subsidiary of Russian Vimetco, plans to increase its annual production of higher added value processed aluminum from 40,000 tons to 120,000 over the next five years, according to Frank Mueller, general manager of the firm.

RUSSIAN

Moscow-based Softline International opened an office in Romania in June, this being the first country in the European Union where the company has established a presence.

Initially, Softline intends to focus on software license reselling, as a first step in its strategy as it establishes a footprint on a new market.

In this phase, Softline will be mainly targeting small businesses. Starting from next year, the firm will also be adding new business segments such as consultancy, IT auditing, outsourcing and education.

“For now, we can only afford to start as a certified reseller but in time we will also be able to become competitors of system integrators and also offer software consultancy.

Obviously, we will not sell hardware but here we can always start alliances,” said Radu Crahmaliuc, regional director of Softline Romania.

The bulk of sales are deemed to come from Microsoft products (3550 percent), followed by security software (around 30 percent) and, thirdly, virtualization and business applications, according to Ivan Klimov, business development director at Softline Group.

“We are aware that we are showing up later on a market that is alBUSINESS REVIEW / November 1 - 7, 2010

RUSSIAN INVESTMENT REVIEW ready mature,” said Crahmaliuc.

However, he added that there were several good reasons why Softline had decided to open an office in Romania.

Firstly, there is big potential on this market due to small businesses which represent 95 percent of the total number of companies and more than 67 percent of the economic potential. Also, Romania may serve as a bridge for expansion in other countries and the software and services sector has not been as hard hit by the recession as in other countries. Other driving factors in the decision to open up an office in Romania were the availability of EU structural funds and the anticipated resumption of IT projects in the public sector.

Others came to the market earlier. Kaspersky Lab has been present in Romania since 2001. Three years later the firm established an R&D centre and in 2008 a regional business development office. Company representatives say that Romania remains a dynamic market for Kaspersky . “In the first half of 2010 the business grew by 84 percent as compared with the same period in

BUSINESS REVIEW / November 1 - 7, 2010

2009,” Garry Kondakov, managing director of Kaspersky Lab EEMEA, told BR. “The region of Eastern Europe Middle East and Africa brought USD 97 million (about 24 percent of the 2009 revenue) showing 46 percent YOY growth. Almost 10 percent of company's EEMEA-driven income is from Romania.”

As for its future business strategy, Kondakov explained that after an intense geographical expansion the company now plans to intensify its presence in key locations. “Now that we are represented virtually in every part of the world Kaspersky Lab’s goal consists of finding new ways to develop in a more intense way,” he concluded.

Another Russian newcomer, this time on the instant payment market, is OE Investments, which launched its QIWI payment facility for local phone services in June. By the end of the year, 500 terminals are set to be installed in Romania, according to company representatives.

The firm operates through both its own terminals and through a network of franchised agents, companies and entrepreneurs that can take

possession of the equipment and connect to the central processing center.

The firm’s investment in Romania is EUR 500,000, while this year’s turnover is expected to reach EUR 1.5 million.

Alexandru Oancea, the company’s commercial director, told Business Review that the main problem on the Romanian market is the low level of knowledge among consumers about the payment tool.

“The Romanian market has a high potential for growth. Locally our priority is to make QIWI payment services popular among various consumer groups. Currently we are promoting terminals QIWI (KIWI) as a convenient method of payment for cellular communication,” Oancea explained.

LOOKING ENERGY

TO THE

EAST

FOR

2010 could turn out to be the first year when Lukoil posts a loss on the local market after several years of consecutive growth. In 2009 the company suffered a EUR 40 million operational loss for the

Petrotel Lukoil refinery while Lukoil Romania reported a EUR 50 million EBITDA but managed to balance its results, according to company representatives. The situation, however, seems unlikely to repeat itself this year too, according to preliminary results.

But when it comes to Russian energy interests in Romania, it seems that the local economy is on the map for larger geopolitical gas projects, at least as far as diplomatic statements go.

The Russian Federation is Romania’s main external source of gas.

Two weeks ago Gazprom officials and the Romanian authorities signed a memorandum of intent over the possibility that the South Stream pipeline may transit Romania.

The pipeline will be 900 km long and is estimated to transport 63 billion cubic meters of natural gas annually.

The project is seen as a rival by the planned Nabucco pipeline, in which Romania has already committed to participate. Both projects are due for completion sometime in 2015.

9

ENERGY

Prospect of national energy champions raises competition fears is a must. “I hope that by the end of the year the two companies will be set up; otherwise we will have problems in ensuring Romania’s energy security,” said Ariton.

The two national energy companies’ managers are looking optimistically to the future, seeing in Electra and Hidroenergetica two potentially regional players. “We do not think of this presence as one that will operate just locally, but one that will become a regional presence as well. We believe that these two companies could invest in production capacities in South-East Europe and could export electricity. Also, we see an opportunity for Hidroenergetica to participate in a regional services market,” said Zachia.

The Economy Ministry has announced plans to set up the two national energy champions, Electra and Hidroenergetica, by the end of the year, privatize the management of the two companies and list them on the stock exchange. However, the private sector has flagged up some negative effects that such a move will have on the energy sector, such as a non-competitive wholesale generation market and fewer private investments.

MARKET

STOCKEXCHANGE

Dana Verdes

Making a splash: Electra and Hidroelectra are seen by authorities as regional players, not local ones

“The most important objective for me as minister is to complete the reorganization of the energy system by setting up the two national energy companies, Electra and Hidroenergetica,” Ion Ariton, economy minister, told Business Review. With this statement Ariton has reopened a sensitive subject put on the agenda of the Economy Ministry by successive administrations, each with its own view.

At first, the plan was less ambitious. The 2006-2008 Liberal government wanted to bundle profitable electricity generators (Hidroelectrica, Nuclearelectrica and the coalfired energy compounds Turceni, Rovinari and Craiova) with the state-owned electricity distribution firm Electrica.

But the Liberal-Democrat coalition (2008-2009) was much bolder.

It is now planned that the Romanian electricity market will have two in-

stead of one national champion.

Moreover, the bundling will not incorporate only the electricity sector.

The two vertically integrated energy firms will include hard coal and lignite mining companies from the Petrosani and Oltenia regions and the state-owned gas producer Romgaz.

With the strike of a pen few electricity generation capacities were left outside: the obsolete and inefficient cogeneration sector administered by incompetent municipalities and the collapsing Termoelectrica, which desperately hopes to renew its coal and gas-fired generation fleet (Doicesti, Borzesti and Braila), about 2,200MW of installed capacity.

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HIGH HOPES FOR THE ENERGY CHAMPIONS The recent publication of the emergency ordinance to modify Law 51 gave the green light to the

minister’s plans. “So far all the national companies included in the two energy champions have the administration council’s approval. Also, the new division and merger project has been presented to the Commercial Registry,” said Dragos Zachia, exploitation manager at Hidroelectrica.

The Economy Ministry official added that setting up Electra and Hidroenergetica by the end of 2010

“The

CONCERNS

Market specialists say that competition on the electricity and gas markets will be impeded by the creation of the vertically integrated firms and that the government’s claim that the market shares of the two vertically integrated companies will decrease over time is flawed.

Massive market power concentrated in the hands of a few firms is detrimental for several reasons.

First, electricity prices will increase at the expense of consumers. Second, the incumbent firms are likely to attempt to block access to the market for other electricity firms.

Third, technological innovation is likely to be stifled as the powerful monopoly-holders will have no incentive to invest in the development of new technologies.

Also, the creation of the two vertically integrated energy firms will

next steps after setting up the two

national energy companies are targeting the privatization of both national energy companies’

”

management and their stock market listing

Ion Ariton, economy minister BUSINESS REVIEW / November 1 - 7, 2010

ENERGY The two national energy champions é Electra (approx. 9,592 MW) will be formed from Turceni and Rov-

inari energy complex, Nuclearelectrica, National Company of Lignite Oltenia, Hidroelectrica branches from Ramnicu Valcea, Sibiu, Targu Jiu and Hidroserv Ramnicu Valcea. é Hidroenergetica (approx. 6,133 MW) will include Electrocentrale De-

BUSINESS REVIEW / November 1 - 7, 2010

uidity if the two companies become operational.”

Despite the negative feedback from the private sector, the authorities are forging ahead with their big plans for the two energy champions: “The next steps after setting up the two national energy companies are targeting the privatization of both national energy companies’ management and their stock market listing,” Ariton told BR of his optimistic plans.

Consequences of having two energy champions é The beneficial effects of the reforms in the electricity and gas sectors

that have been undertaken until now will be lost. é The wholesale generation market will become non-competitive, with

negative effects for the final consumer, downstream markets and prices. é Private investments are likely to cease. é The security of supply is endangered by the government policy.

SOURCE: CANDOLE PARTNERS

significantly decrease the competitiveness of the electricity generation market.

“The system services market will be monopolized by the two national energy companies which will be driven to make profit to the detriment of private investors, especially those investing in renewable energy units,” said Razvan Grecu, consultant at Candole Partners. “It is expected that the futures and spot markets will also see less and less liq-

SOURCE: ECONOMY MINISTRY

Both Adriean Videanu and Ion Ariton, former and current economy ministers, support the setting up of the two national energy companies

va and Bucuresti, Termoelectrica Paroseni and Termoserv Paroseni, Hidroelectrica branches from Bistrita, Buzau, Cluj, Curtea de Arges, Hateg, Iron Gates, Oradea, Sebes and Slatina, Hidroserv branches from Bistrita, Slatina, Iron Gates, Curtea de Arges, Sebes, Hateg and Cluj and the National Company of Mineral Coal.

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BR EVENTS / ENERGY

Energy players debate wisdom of national conglomerates Although the authorities expect the setting up of the two national energy companies, Electra and Hidroenergetica, to be completed by the end of the year, energy specialists and representatives of private companies emphasized the negative effects that a reorganization of the energy sector would have on the local market during the Energy – Focus on Power event, organized by Business Review last week.

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■ 1. Doina Visa, senior operations officer at World Bank ■ 2. Cristina Filip, partner at PeliFilip

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■ 3. Valeriu Binig, financial advisory services, energy and resources, corporate finance director at Deloitte ■ 4. Dan Preotescu, network planning division director at Transelectrica ■ 5. Razvan Grecu, senior energy analyst at Candole Partners ■ 6. Dragos Zachia, exploitation ALL PHOTOS: LAURENTIU OBAE

12

director at Hidroelectrica ■ 7. Laurentiu Dinu, general manager at Accreo Romania ■ 8. Dana Duica, executive director at RWEA ■ 9. David Nicholl, country manager at Schneider Electric ■ 10. Silvia Vlasceanu, counselor in the Romanian Parliament and executive director of the Association of Companies for Energy Utilities in Romania

Hidroelectrica representatives attending the BR event underlined that the two major issues facing the two national energy companies are the integration of the not profitable Termoelectrica structure and obtaining the financing for such a project. “I believe that we will find financing for this project as Moody’s is currently evaluating Hidroelectrica,” said Dragos Zachia, exploitation manager at Hidroelectrica, at the event.

But Doina Visa, senior operations officer at World Bank (WB), countered, “The state will not easily find financing for the two energy champions project.”

According to a World Bank study carried out in 2005 and repeated in 2007, from 2017 there will be an energy deficit, if measures are not taken in the generation sector all around the region.

The WB official also pointed out that foreign investments in Romania have decreased significantly, not necessarily entirely because of the economic and financial crisis, but because of the business environment’s instability.

“Without solid private investment, the entire region will have problems in ensuring its economic development, not only Romania,” cautioned Visa. She added that the WB has been asked by the Romanian authorities to establish a long-term energy strategy, technical assistance for which will start at the end of November. Specialists warned the audience of the negative effects that the formation of the two energy companies will have on competitiveness in the local energy sector. And Dan Preotescu, network planning division director at Transelectrica, spoke about the companies’ issues in trying to keep up with the private investment in this sector, which he said could reach EUR 10 billion. “We have interconnecting projects with Bulgaria, Hungary and Serbia. Compared with the first half of the year when the energy demand from these countries was very low, things currently seem to be a little bit better. We’re having serious problems with obtaining financing, because our plans aren’t just to expand the network but also to upgrade it,” said Preotescu. The Business Review event, which gathered around 80 company officials, was organized in partnership with Schneider Electric, PeliFilip and TransFonD. For more information about future BR events, please visit www.business-review.ro/events/.

BUSINESS REVIEW / November 1 - 7, 2010

BR EVENTS / ENERGY 11

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13

■ 11. Panelists debating the advantages and disadvantages of setting up the two national energy companies, Electra and Hidroelectra ■ 12. Some 80 company representatives attended ALL PHOTOS: LAURENTIU OBAE

the Energy – Focus on Power event organized by Business Review last week ■ 13. Valeriu Binig of Deloitte and David Nicholl of Schneider Electric discussing energy related issues during the networking session of the event.

: Addressing Challenges to Power

BUSINESS REVIEW / November 1 - 7, 2010

ence and a transactional background which is very difficult to match in Romania.

The specialized energy team comprises one partner, two senior associates and five associates who work closely with lawyers of other practice specialist areas and other practices that are typically relevant for the energy projects, such as real estate and construction, projects and infrastructure, finance, environment, public procurement/competition and corporate /M&A. Cristina Filip, the head of the Energy Practice at PeliFilip, is recognized as the leading lawyer in the Romanian energy market, as reflected in the major independent league tables.

“The strength of this team rests with Cristina Filip, who has established herself as a leading lawyer in energy and natural resources”. Chambers and Partners, 2010 The cumulative experience of PeliFilip energy team has been developed in a majority of the most complex and high profile transactions in the energy field in Romania of the last 10 years, as

well as numerous international transactions, whether being the most relevant privatizations, mergers and acquisitions in the energy sector, energy investment projects, energy regulatory advice, financing schemes for the energy and infrastructure projects, with a special focus on renewable energy projects.

The experience and the large specialized and dedicated energy team, as well as the ability of other specialist practice areas and practices to grant high-quality support for any related, ancillary or other specialized matters, allow PeliFilip to offer the clients one of the best options in Romania for legal services in relation to energy and projects matters. www.pelifilip.com

ADVERTORIAL

Providing outstanding legal services in Romania is the focus at PeliFilip.

PeliFilip team achieves excellent service by bringing to the client legal certainty, clarity and timely solutions to the relevant matters. Creativity and effectiveness are among the PeliFilip core values and are always grounded on solid knowledge of law and practice.

PeliFilip offers advice on a wide range of legal areas and industries, from Energy and Infrastructure, M&A and Corporate to Finance and Capital Markets, Property (Real Estate, Lease and Concessions), Public Procurement, Competition & Trade, IT and Telecommunications, Employment and Dispute Resolution.

PeliFilip considers as capital aspect

in business law practice the quality and the cohesiveness of the team and constantly invests efforts and resources in the continuous professional development of Peli Filip lawyers.

PeliFilip lawyers are widely recognised top practitioners in the Romanian market, active across all relevant areas of practice by both peers and international league tables, working together with some of the most promising young lawyers in Romania.

The team is comprised of 35 lawyers, 5 of whom are partners.

Large multinationals or local groups have chosen PeliFilip as preferred advisor in a variety of sectors, such as oil, gas and power, infrastructure, automotives, financial services, real estate and constructions, insurance, telecommunications, pharmaceutical.

“PeliFilip is an impressive newly established firm destined to become a major force in the marketplace” – Legal 500, 2010 PeliFilip Energy Team is recognised among the best on the Romanian market, having a wealth of experi-

13

FOCUS

Food supplements fight for healthy profits on an ailing market Prevention is better than cure, goes the old saying. Romanians have a similar maxim, but the numbers tell a different story. Annual per capita consumption of nutritional supplements in Romania is only EUR 4.7, about 20 times below that in Germany and about 8 times lower than the figure in neighboring Hungary. Pharmaceutical companies complain about the lack of education and slashed purchasing power, but agree that against this backdrop there is huge potential for growth in the coming years.

Simona Bazavan

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STOCKEXCHANGE

There are considerable differences between the local nutritional supplements market and its European counterparts, and definitely not for the better. To begin with, there are difficulties in settling what a food supplement is in the first place. “The Romanian consumer isn’t yet fully accustomed to the notion itself, and this is why there is a multitude of interpretations regarding the products and their proper use,” Pfizer Consumer Healthcare representatives told Business Review. The same sources added that similar products have a different status, as some are registered with the National Medicines Agency

Bitter pill to swallow: sellers of dietary supplements bemoan the public’s lack of product awareness

(ANM) as OTCs (over the counter medicines) while others are licensed by the Health Ministry or the Institute for Medical Bio-resources.

“The Romanian food supplement market is still in its infancy and there are still big names expected to enter the market. Only about six local brands have chosen to invest on the local market, the others simply settling for placing their product on the shelves and expecting sales out of a low price policy,” said Pfizer Consumer Healthcare representatives. Pfizer is present in Romania with the Centrum brand of food supplements.

The local dietary supplement market reaches approximately EUR 100 million in Romania. Until 2008,

BUSINESS REVIEW / November 1 - 7, 2010

FOCUS the market had been growing constantly, even posting double-digit increase rates. But in 2010 the market is expected to decrease by up to 20 percent in value according to some pharmaceutical companies, mainly due to shrinking personal and family budgets. The VAT hike to 24 percent in July has also taken its toll on sales.

Reports from pharmacy chains are less pessimistic. “Quantitatively, consumption so far in 2010 is similar to the figure posted in the same period of 2009. However, considering the price increases made by producers and the VAT hike, we have witnessed an 11 percent value increase on this segment,” Isabelle Iacob, general manager of Help Net Farma SA, told Business Review.

While prescription drugs are taxed at 9 percent VAT, the same doesn’t apply to food supplements.

Although apparently unrelated, reduced funds for free and subsidized prescriptions also affect the market.

“Due to decreasing purchasing power, some patients, especially the elderly, will focus on acquiring the necessary prescription drugs to the detriment of prevention through nutritional supplements,” explained

BUSINESS REVIEW / November 1 - 7, 2010

Iacob. The strong link between decreasing purchasing power and consumption however, is also a sign of Romanians’ lack of education regarding prevention through food supplements, producers complain.

Romanian doctors are also more likely to recommend prescription medicine than dietary supplements as most Romanians ask for their services when it’s too late to avert the ailment.

“The Romanian consumer is, unfortunately, insufficiently educated and faces difficulties in choosing from the food supplements available on the market those that better address his or her needs,” Adrian Samson, general manager of GlaxoSmithKline Consumer Healthcare Romania, told Business Review.

Part of the OTC (over the counter) segment, dietary supplements are an attractive market for pharmaceutical companies as authorities have no word in the pricing policy and in spite of the competition there is still a lot of room for growth.

GlaxoSmithKline is present on the local market with the Eurovita range of supplements and Vitamax.

This year the company has launched new Eurovita products: Eurovita

MultiVital A-Z, Eurovita Osteo Vitactiv, Eurovita Magneziu 400 Plus Vitamins C and E, Eurovita Ginkgo Mental, Eurovita MemoExtend, Eurovita Omega 3 Concentrate and Eurovita Q10 VitalCel. GlaxoSmithKline makes most of its sales through pharmacies which is another characteristic of the local market. Only about 10 percent of overall sales are generated through retail networks and online stores.

“Few brands are sold through the retail network,” Samson explained, adding that in Western countries there are vitamins for which retail

distribution is much more important than dedicated drug stores. “But in this case we are talking about a different education level among consumers and an older tradition,” he added.

In 2009, food supplements represented about 8 percent of the total sales of Help Net and a similar share is expected this year also. Best selling supplements at the pharmacy chain are those for strengthening the immune system, products treating cold and flu symptoms and weight loss aids, said company representatives.

Some supplement brands available locally Producer

Brand

Amway

Nutrilite

Bayer

Bayer Aspirin, Canesten, Supradyn, Rennie

GlaxoSmithKline

Eurovita line, Vitamax

LaborMed

Ozone line

Pfizer

Centrum line

Terapia Ranbaxy

Faringosept, Paduden

Walmark

Full product range

Zentiva

Calibrum, Sicovit, Tarosin

15

BALANCE

Bucharest’s cultural scene defies the hard economic times

Corina Dumitrescu The Bucharest National Opera (ONB, Opera Nationala Bucuresti) will stage this year, as usual, up to ten premieres, says Catalin IonescuArbore, the institution’s general manager. These performances encompass both the new productions at the main hall (or “sala mare”), as well as those in the Yellow Foyer (Foaierul Galben), staged by the Experimental Opera and Ballet Studio “Ludovic Spiess”.

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LAURENTIU OBAE

Opera, theater or philharmonic – just take your pick, as such cultural events continue to sell out, regardless of the economic context and the public’s shrinking purchasing power. The 2010-2011 program has already started and offers a wide palette of choices for which no knowledge of the Romanian language is necessary. The Bucharest National Opera, George Enescu Philharmonic, Bucharest National Theater, National Operetta Theater, Odeon Theater and Passe Partout theater company are all part of BR’s selection of leisure events for culture aficionados across Romania.

The Romanian Athenaeum, flagship building and center of culture in Bucharest

By the end of the year, five premieres will take place at the Bucharest National Opera, including Giuseppe Verdi’s “I Due Foscari” on November 14, presented as a concert-spectacle, conducted by Iurie Florea, the contemporary creation of German composer Peter Ruzicka; “Celan”, on November 28, a co-production with the Bremen Theater and an homage to Paul Celan, a Hebrew poet of Romanian origins; as well as “Tango. Romeo and Juliet”, on December 12, a contemporary ballet, whose second half is based on British alternative rock band Radiohead’s music, scenographer Ionescu-Arbore reveals.

Aside from these three premieres taking place in ONB’s main hall, the Opera and Ballet Experimental Studio is putting on Giuseppe Verdi’s “Alzira”, on December 11, as part of the “Rare

Opera” project, bringing into the spotlight lesser known works, and “Snow Queen” (“Craiasa Zapezii”), on December 5, a ballet for children, both taking place at the Yellow Foyer.

However, there will be other highlights aside from the premieres at ONB. As Ionescu-Arbore says, its most successful operas so far have been Puccini’s “La Boheme”, Bizet’s “Carmen”, Verdi’s “La Traviata”, Wagner’s “The Flying Dutchman” and the ballets “Giselle”, “Cinderella” and “Snow White and the Seven Dwarves”.

A tradition for the opera, as part of the New Year festivities Johann Strauss II’s operetta “The Bat” (“Die Fledermaus”) will be staged on the last evening of the year. As for 2011, the schedule is not yet finalized due to some repair works that the institution’s building will have to undergo in the coming year.

As regards the economic crisis, Ionescu-Arbore is optimistic, even though the ONB depends on the state budget for 96-98 percent of its revenue, and salary cuts have been made, but with no repercussions on the quality of the performances.

People seem now to be more avid cultural consumers than ever, as “spectators seek a refuge in the auditorium, so that for at least two hours they can get away from the problems that we are all facing,” says Ionescu-Arbore.

The George Enescu Philharmonic, founded in 1868, is considered to be Romania’s most famous musical institution. Based at the Romanian Athenaeum, one of Bucharest’s flagship buildings, the concerts that the institution will stage this year are all unique, “once in a lifetime opportunities”, say representatives.

Shows are also held on a regular basis, as is the case of the symphonic concerts held on Thursdays and Fridays.

A highlight of the Philharmonic’s program this year will be the “George Enescu” Philharmonic Choir’s 60-year anniversary event, comprising four concerts that began on October 11 and will conclude with an extraordinary vocal symphonic concert on November 29. On this date, pianist Valentin Gheorghiu and singers Lavinia Mamot, Gianina Munteanu, Ionut Popescu and Stefan Ignat, conducted by Iosif Ion Prunner, will perform the works of Ludwig van Beethoven and Giuseppe Verdi.

Apart from the George Enescu Philharmonic’s consecrated program of symphonic, instrumental, chamber and choral concerts, the Athenaeum’s talks are another tradition that has been successfully continued over the years, bringing some of the best known and respected Romanian cultural figures into conversation. Most recently, on September 27, the German writer of Romanian origin Herta Muller, winner of the 2009 Nobel Prize for literature, held such a conference with writer Gabriel Liicenu.

BUSINESS REVIEW / November 1 - 7, 2010

BALANCE The Bucharest National Theater (TNB, Teatrul National Bucuresti), although its works are mainly performed in Romanian, is also putting on some events that can be attended by foreigners. One example is Don Quijote, a pantomime play directed

by Dan Puric, an acclaimed Romanian actor, one of the biggest names in pantomime acting. Another recommendation made by theater officials is the theater and dance show “…and Juliet”, staged in collaboration with the Greek Cultural Foundation in Bucharest. The dance troupe Vertige will take part in the show, led by Amalia Strinopoulou, who is also the scenographer of the play.

Another highlight at TNB is Oscar Wilde’s “The Nightingale and the Rose”, featuring actor Marius Manole as the storyteller, one of the top Romanian actors of the younger generation. Described as a videopoem, the show uses unconventional and modern means of expression, such as electro music, video projection, gesture dance and pop-up décor. The play was young underground director Carmen Lidia Vidu’s debut at the national theater.

Videos of the show are available for

BUSINESS REVIEW / November 1 - 7, 2010

view on YouTube.

Returning to Dan Puric, the Romanian actor and director also has his very own theater company Passe Partout, which specializes in pantomime techniques. Freshly returned from an international theater festival held in Cairo, where the company’s shows were very well received due to the “international language that they speak”, says Violeta Totir of Passe Partout, the troupe is ready for the shows that it will stage in Romania, at Sala Rapsodia, on Lipscani 53. November’s productions include “Made in Romania”, taking place on the 25th, a story of the country, created by Dan Puric “with the hope that in the supermarket in which we are living, these fast-men, fast-thinkers and fastlovers will pull back from their fastfood and remember something,” the director says on the theater company’s website. Other imminent shows are “All Five” (13 November) , “Us” (14th), “Fantasmagoria” (20th), “Rencontres” (21st) and “Two of Us” (27th).

The National Operetta Theater “Ion Dacian” is also hosting notable events that no culture lover will want to miss. Between November 4

and 14, the third edition of the International Arts Festival of the Musical Spectacle “Life is Beautiful” will take place, including a series of shows, concerts, exhibits, workshops and conferences. This year’s special guests will be Mariza (a Portuguese fado singer), Laurie Anderson (experimental music), The Tiger Lillies (dark cabaret) and DJ Ravin (ambiental music), who will be performing as part of the “Life is Beautiful” concerts.

Musical and operetta shows from renowned theaters in Hungary, Russia and Ukraine, as well as local theatres, will be staged, including the debut of Johann Strauss II’s “The Bat”. Part of the musical program is the National Operetta Theater’s collage of chansonettes “Paris, mon amour” and “The Tango of Life”, under the direction of Bogdan Strutinsky of the Academic Theater of Operetta in Kiev.

The Hazard magic show will also take place as part of the festival, held by illusionist Andrei Teasca, founder of the Magic Theater. Two photo exhibitions will be held in the theater’s foyer, one by Jan Saudek and another marking 60 years since the foundation of the National Op-

eretta Theater. Book and CD launches, talks and children’s workshops are also included in the program. Tickets for the event are available from the National Operetta Theater, as well as online, on eventim.ro.

Other hot-ticket events include the spectacular choreography shows held by choreographer and dancer Razvan Mazilu, at the Odeon Theater. These include “Un Tango Mas”, “Block Bach” and “Depeche//Dance”, a choreographical interpretation of British electro-goth pioneers Depeche Mode’s music, created by choreographer Massimo Gerardi, taking place on November 7, one of last season’s premieres which garnered much acclaim. For non-Romanian speakers, the Odeon Theater is also working on plays with subtitling in English and French, including “Ionesco – five short plays”, “Hamletmachine”, “It’s Just the End of the World”, “The Hotel Room – a Trilogy” and “Pyramus & Thisbe 4 You”.

It all adds up to a diverse, quality cultural calendar, certain to give any foreigner an insight into a country that fuses old and new, modern and traditional.

17

PROPERTY Sprider Stores adds EUR First multiplex cinema opens in Baia Mare 1 mln Piatra Neamt The first multiplex in Baia Mare location to network will open, Cinema City’s ninth in-

LAURENTIU OBAE

This is Sprider’s third new store this year

Greek fashion retailer Sprider Stores has opened an outlet in Piatra Neamt with a EUR 1 million investment. This is the third store opening this year for Sprider, after ones in Sun Plaza mall in Bucharest and in Promenada mall in Piatra Neamt. It is the company’s 16 store in Romania.The new unit takes up two levels and covers 1,100 sqm. Since entering the local market Sprider Stores has invested a total of EUR 20 million in Romania. The retailer employs over 190 people all over the country.

Alsa Group to open Bucharest mono-brand Emporio Armani store in November

Designer store Emporio Armani is coming

Alsa Group will open a mono-brand Emporio Armani store in Bucharest in early November, according to cpp-luxury.com. The shop is located on Calea Victoriei and has a 280-sqm surface. Besides the Armani franchise, Alsa Group also operates the Ermenegildo Zegna and Max Mara franchises for Romania.

Other luxury names with monobrand shops in Bucharest include Louis Vuitton, Canali, Ermenegildo Zegna, Hugo Boss, Paul & Shark, and Moschino. The store will not include the Emporio Armani Café.

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vestment in Romania.The six-hall cinema will be situated in the center of the town, in the newly opened commercial center Gold Plaza. The multiplex is the first of its kind in the Maramures area, where so far there have only been conventional onescreen cinemas. Up to 15 movies per week can be shown in the multiplex, which will also have digital 3D technology.

With the opening of Cinema City in Baia Mare, the company will extend its number of screens in Romania to 88, with a total of 14,600 seats. Cinema City thereby becomes national market leader for the number of multi-screen cinemas, as well as cinema halls, with 50 percent more than its nearest rival.

Cinema City intends to add two more multiplex cinemas in Braila and Targu Mures to the existing ones in its portfolio, in Bucharest, Pitesti, Iasi, Timisoara, Cluj and Bacau.

Corina Dumitrescu

D&M Perfect Real Estate puts EUR 8 million into Bucharest Epoque Hotel

The hotel is aimed at free independent travelers

D&M Perfect Real Estate has invested EUR 8 million in Epoque Hotel, a five-star Bucharest facility which is expected to open at the beginning of November.

The hotel is located close to Cismigiu Park in downtown Bucharest and targets free independent travelers (FIT), having been developed as a luxury brand. The management of the hotel is provided by Trend Hospitality.

The site’s general manager is Anthony Kuhnen, a former GM of Bucharest’s Howard Johnson hotel.

The hotel, which was built between 2007 and 2010, has a capacity of 45 apartments of 35-110 sqm each, and includes a spa as well.

Trend Hospitality is a strategic developer for the Wyndham Hotel Group brands in Romania, Bulgaria and the Republic of Moldova, and owns exclusive rights in Romania for developing and transforming hotel properties under the following Wyndham brands: Wyndham Hotels & Resorts, Ramada Worldwide, Ramada Encore, Days Inn and Super8.

Four more H&M locations announced for next year Swedish fashion retailer H&M will open four more locations next year, pushing its number of announced local outlets to six.

Three more stores will be opened in Iasi, Timisoara and ClujNapoca in the Palas commercial center and the Iulius Malls.

Another outlet will be located in Constanta in the Maritimo Shopping Center, the former Polus Center Constanta which is owned by Austrian group Immofinanz, Mediafax newswire has reported.

Immofinanz, which resulted from the merger of Immofinanz AG and Immoeast, plans to finish construction works on the Maritimo Shopping Center in September 2011, according to data from the Austrian group.

French hypermarket chain Auchan is also expected to be a tenant in the center.

The first outlets are expected to open in AFI Palace Cotroceni and Baneasa Shopping City in 2011.

Maritimo Shopping Center is expected to have a rentable space of 51,000 sqm. Construction works on

H&M is planning to open four more outlets next year, taking its total to six

it started in 2007 and the initial delivery deadline was set for 2009. Immofinanz has taken over the mall from Trigranit, after signing an acquisition contract for it in 2007.

Some of the projects Immoeast has finished in Romania include Polus Center Cluj-Napoca, Armonia Arad, Euromall Galati, S-Park, Iride Business Park, Bucharest Corporate

Center and Victoria Park.

Developer Iulius Grup owns four malls in Suceava, Iasi, Timisoara and Cluj-Napoca, with a total surface of 346,000 sqm.

The company is currently building a 320,000-sqm real estate complex in Iasi including a mall, a commercial area, office buildings, two hotels, apartments, a spa and underground parking space.

BUSINESS REVIEW / November 1 - 7, 2010

INTERVIEW

Beauty firm Amway finds its way on ugly market Amway entered the local market in 1997 but it would be another three years before the company started to post serious growth. This year, Amway predicts it will reach a turnover of EUR 32.45 million, a lower figure than last year due to the recession. The firm now has around 50,000 authorized distributors and privileged clients on the local market. GEORGE POPESCU, country manager of Amway Romania, says the country is an important market in Europe.

ees, 14 of whom work in the store and the warehouse. The rest of them work in the distributor relations, marketing, operational and financial departments. No new recruitment is planned, unless a position becomes vacant.

Where are your offices and store?

The Center for the Selection of Products, has a warehouse and a training room with a capacity of 100. The training room is used by the company’s training team but can also be used by our partners for meetings and events. The warehouse and the shop are within the Romexpo compound and the space is rented. Currently, there are 14 employees working there who are in charge of operations in this facility. The premises were inaugurated in 1997. Initially, the offices were also there but in 2006 we moved them to an office building in Floreasca. We pay rent but the sum is confidential. However, as it was negotiated for three years, we can tell you that it is at an advantageous level.

Otilia Haraga How many Amway distributors are there in Romania?

There are approximately 50,000 Amway authorized distributors and privileged clients – people who join Amway but do not wish to sell, only consume products. The number of those who re-sell our products to final clients amounts to several thousand and is rising.

What is your pricing policy?

Product launches and price strategies are not local. We are working at European level and countries are very different; there is no similar profile for the consumer. It is very likely that a certain launch won’t have the same effects in Romania and Germany, but due to differences between the size of these two markets, it is more important for the company to have a more positive effect in Germany. Marketing is centralized at a European level. We try not to have discrepancies between prices because this would also create unrest among distributors, as prices from one country to another are well known. We had to increase prices by 4 percent in March because there were currency exchange differences that we had to cover. Prices also increased a little with the growth of VAT. Your sales take place in Romania via what channels?

Amway was one of the pioneers of BUSINESS REVIEW / November 1 - 7, 2010

direct sales via the internet and most of our sales – 70 percent – take place through this channel. We have maintained a store in Bucharest – The Center for the Selection of Products – and approximately 24 percent of our sales are made through this outlet. It is a concept that Amway started with in most countries in Europe. We still keep it going because in Bucharest people prefer to actually go shopping rather than wait for a courier at home. Currently we are working with courier companies TCE and Pegasus. The remaining 6 percent of sales are orders via the telephone or fax, which have a value of over USD 1,622 (RON 5,000). Orders that are higher than this sum cannot be paid in cash because of legislation stipulations, they are paid through bank transfer and the orders come through a different channel.

What about sales per each range?

Sales in Romania per range of products are relatively similar to other European countries.

Sales of more expensive products have been the most affected, due to the recession, no matter what category they were part of. We have more than 400 cosmetic products. The range of cosmetics and personal care product brings ap-

proximately 60 percent of our sales.

However, food supplements are strongly gaining ground, bringing us 25 percent of sales. In the Nutrilite range, we have approximately 50 products. Nutrilite is the most stable range of products at the moment. There are products that are present on other European markets but not here. Otherwise, the products are the same throughout Europe. In Western Europe, sales of food supplements are higher; there are countries where these sales represent 40 percent of the total figure. This year, having launched Beauty Cycle, a more accessible range of cosmetics that is available only in Europe, we have focused a great deal on beauty products, and this naturally had an impact on the mix of sales.

The remaining 15 percent of our sales are split among food, homecare products, water treatment devices and our set of cooking dishes. Last year, Amway Romania sold 2,400 eSpring water treatment systems. Next year, we will continue to launch new products on all segments but not an entire range.

How many employees does Amway have at the moment? Do you intend to hire more?

At the moment, we have 39 employ-

What share does Amway Romania have on the market of direct sales?

We cannot provide you with an official figure but regarding the general positioning among companies of direct sales, we are around third place. In first place is Avon.

What turnover and profit do you estimate Amway will post in 2010?

This year we estimate we will have a turnover of USD 32.45 million (RON 100 million – ed. note: calculated at the current exchange rate). Last year we posted USD 37.12 million (RON 109 million – ed. note: calculated at the 2009 average exchange rate). Our turnover has decreased because of the lower purchasing power of the Romanian consumer. Last year, Amway Romania posted a profit of approximately USD 3 million (RON 9 million) and this year we estimate a similar level.

How important is Romania in the European region?

Romania is among the top 10 European markets for Amway and among the most important ones as well. Before Romania are countries with a tradition such as Germany, which is the first market in Europe where Amway launched operations. Other countries with a large volume of sales are Turkey and Ukraine, but these countries also have a larger population.

19

RESTAURANT REVIEW

GREED, GREED, GREED! OSTERIA GIOLA, MIHALACHE 16 (UNA MAI) TEL 021 311 3750

I

20

STAIRS! But we were hungry and curious about this, Bucharest’s newest eatery, which was beginning to fill up. And now the unashamed, greedy rip-offs began.

We were presented with tiny fingersized mini pizzas to chew on whilst we perused the menu. But wait. They came at a price of RON 5 per person, and we had not asked for them. Presumably, we should be intimidated and pay. But, oh boy. They chose the wrong table! We refused to pay, but that was just the beginning of a forgettable experience.

So off we went to a starter of alleged goose liver pate. We were in shock when we tasted it, for there was no liver flavor whatsoever, and I am convinced it was a pate made from PORK. Bear in mind that in Europe where Trading Standards are enshrined in the laws of each country, if I had taken a sample of the offending pate for analysis and it was determined not to contain goose liver, this would result in either a massive fine being levied on the House, or even it being

LAURENTIU OBAE

raced down to this new eatery as soon as I heard it was an Italian chophouse that did not have the usual boring, tourist trattoria menu which dominates this town. So well done, House! In fact, the menu is vast, and is simply the largest and most comprehensive Italian menu in the land.

Again, well done, House! And as for the beverages, there was a huge selection of 71 different wines and 42 different brands of spirits. OK, this is the last bravo I will give to the House, because it all went downhill as soon as we sat at our table.

We picked a table downstairs without realizing that downstairs was the smoking area. So you have to walk through the smoking section to reach the non smoking section upstairs. My table and I are all confirmed non-smokers, so you can imagine that this was not an auspicious start to our meal. Furthermore, since the non-smoking area is open plan to the downstairs, you can guess where the smoke goes. That’s right. UP-

Italian insult: the menu may be impressive but the prices are outrageous at this new eatery

closed down.

But this is third world Bucharest, the capital where there are no standards, and cheating the public is considered to be an art by a population which does not understand the meaning of ethics. So in their greed they charged us RON 60 for this dish, which I doubt would have cost the house any more than RON 8.

We pointed out that this was not goose liver to the Patron, who dismissed us with a smile and told us we were wrong, before walking away from our table.

But the greedy insults continued.

Our next dish was “fish soup with red mullet and sea scorpion”. Oh give me a break, it was nothing of the sort. At a whopping RON 50, the chef had made a basic fish stock by correctly boiling down fish bones. That should be the beginning of the dish which he should build up, but he did not do so. There was no identifiable fish in this bowl of fishy water, just the residue of a few flakes which had floated off the fish heads and bones during boiling.

Dammit, at this price I could eat Bouillabaisse in Lyon, resplendent with crayfish and prawns… or a classic thick creamy French fish soup with cognac and topped with a rouille in a quality restaurant in Paris. But I am not in France. I am in third world Bucharest being laughed at by a House which is taking the financial piss out of the customers. And did it get better? No! For next I saw “St Jacques (scallops) with Béchamel sauce”. I don’t like Béchamel, so I asked if my scallops could be fried in butter, garlic, Parmesan and white wine. And why not at RON 63? Beyond belief, they refused to accommodate my simple request. Please bear in mind that in every quality restau-

rant I have been to, the chefs will ALWAYS help a customer with a bespoke change to the menu. Most chefs come out to the table with a smile and discuss it with you. I say most chefs, for here they didn’t care. But my misery was just beginning.

Just look at your thumb whilst you read these words. My baby scallops were a mere three in number, each one much smaller than half your thumb. And yes, that is for the greedy price of RON 63.

But we were determined to find something good about this place. And we did with their pastas of spaghetti, ravioli, tagliatelle etc. They were made in house and were perfect. The menu was adventurous, with seven dishes containing porcini mushrooms and four expensive dishes containing truffle sauce, which owes more to cheap truffle oil than fresh truffle. Also, their desserts were excellent.

I cannot fault their décor, which was bright and contemporary stylish. With 62 dishes on the menu, I have no doubt that they must surely be able to get some of them right. Sadly, we did not find anything praiseworthy on our visit other than their pasta and desserts.

But I am not going to pay Paris, London and Milan prices (from the House price RON 120 to 220) for seafood or RON 80 plus for mains which I could eat in those three fine, sophisticated European cities at a lower price than in this dump of a city.

I wish the House well, and they will doubtless get a lot of attention from new, curious customers in this, their opening year. But will people continue to pay these outrageous prices after the dust has settled down? I doubt it.

Michael Barclay BUSINESS REVIEW / November 1 - 7, 2010

CITY FILMREVIEW: The Autobiography of Nicolae Ceausescu, the dictator’s fictitious response to his capitalist indicters

Romanian director Andrei Ujica’s three-hour attempt to reconstruct the fallen dictator throws the viewer into Ceausescu’s propagandistic universe without too much fuss or introduction.

The short episodes created during Ceausescu’s life follow one another as abruptly as his glory, sometimes bringing sadness, other times awe and on occasion even pity.

If the Romanian ruler had had a right to reply during his trial in 1989, this would probably have been it, as the documentary takes the viewer through some of communist Romania’s most memorable events, including visits from Richard Nixon and Charles De Gaulle, Nicolae and Elena Ceausescu’s encounters with Queen Elizabeth, Jimmy Carter, Mao Tse Tung, Leonid Brezhnev,

Damian Draghici brings Jazz in the City

Damian Draghici and friends will be performing in Bucharest at Jazz in the City, on November 12. A former disciple of Dinah Washing-

Fado singer Misia to return to Bucharest Portuguese fado singer Misia is returning to Romania for the fourth time, this time giving a concert at Sala Palatului, on November 29. In conjunction with the Portuguese Embassy in Bucharest, Plai festival organizers will bring the Portuguese singer to Bucharest as part of her Ruas tour, promoting her eponymous double album, which has as its main theme streets as places of passing, meeting and parting. The album also showcases the singer’s musical influences, which include Nine Inch Nails, Joy Division and Dalida. Tickets for the event cost between RON 70 and 250 and can be purchased directly from the concert location, the Diverta chain or

STOCKEXCHANGE

UNIVERSAL MUSIC ROMANIA

BUSINESS REVIEW / November 1 - 7, 2010

daily outdoor walks and a regular meal schedule.

The hotel has 16 rooms, of which two are reserved for VIPs (Very Important Pets). One night at the hotel costs between RON 45 and 120, reports Mediafax. The manager of the property, situated on Barbu Vacarescu Boulevard, is trainer Robert Caraman, who has 18 years’ experience of working with animals.

Corina Dumitrescu

Fado music fans will rejoice in Misia’s concert

online on myticket.ro, ticketpoint.ro and bilete.ro Corina Dumitrescu

Sting’s daughter’s band to perform locally

Canine comforts: Cats and dogs alike can rest their weary paws in the pet hotel

Bucharest’s pampered pooches need slum it no more, as the first dedicated pet hotel in the capital has opened its doors.

Pluto Pet Hotel lodges both cats and dogs in individual rooms with furniture, television sets and underfloor heating, while some rooms even boast terraces, reports newswire Mediafax. The rooms, which are video monitored, will also be decorated with objects that are familiar to the pets, who will enjoy

ton, Diane Schuur, will also take part in the event. Over an impressive career of over three decades, she has notched up two Grammy awards and three nominations. Another winner of numerous Grammy awards, clarinetist Eddie Daniels, will also perform. Legendary musician Leonard Bernstein once referred to him as a thorough artist in the classical discipline and he also plays jazz music. Jazz in the City will take place at Sala Palatului.

Tickets can be purchased from the location directly or at www.eventim.ro, from Germanos, Vodafone, Orange and Domo stores, as well as Humanitas bookshops.

Corina Dumitrescu

COURTESY OF MISIA

It’s a dog’s life as first pet hotel opens its doors

COURTESY OF BRIGHT LIGHT

From the glory days to the fall – the story of a communist leader

Alexander Dubcek and Mikhail Gorbachev, Ceausescu’s famous visits to North Korea and China and behind-thescenes looks at his daring, but mostly hubristic, architectural projects, such as the House of the People.

Ujica’s motivation behind his tremendous effort of viewing over one thousand hours of footage, which produced a documentary with a running time of three hours, lies, he says, in his desire to better understand the dictator “whom I struggled all my life to avoid”.

The movie is, therefore, therapy for the once young rebel from Timisoara, an attempt to humanize or make sense of a too-often absurd leader who occasionally had notable moments of lucidity. One of these, presented in the documentary, was Romania’s refusal to participate in the invasion of Czechoslovakia by the Socialist countries in 1968.At the start of the discussion with the Romanian director which followed the pre-premiere of The Autobiography of Nicolae Ceausescu, many members of the audience said that they almost felt sorry for the dictator. Yet, as Ujica concluded, if the same technique of zero intervention from the director in the times’ propagandistic material had been used in Hitler’s case, he too would have seemed more human.

Corina Dumitrescu

Jazz in the City brings pan flautist Damian Draghici back to town

The apple doesn’t fall far from the tree for Coco

British electro group I Blame Coco, fronted by the daughter of Sting, will hold its first concert in Bucharest, in the newly launched location The Ark Underground, on November 5. Sting and Trudie Styler’s daughter, Eliot Paulina Sumner, nicknamed Coco, the band’s lead vocalist, was already writing songs at 15, and was signed by Island Records on a multi-record deal at 17 years old. She cites Kraftwerk, Depeche Mode and The Cure as influences. Tickets cost RON 50. The Ark is located on Uranus 150, formerly known as Calea Rahovei 196A. Corina Dumitrescu 21

CITY

Bon Jovi coming to Romania next year

Romanian fans will no longer have to be livin’ on a prayer to see Bon Jovi in concert

Bon Jovi will hold a concert in Bucharest next year, the band have announced on their official website.

The gig will take place in Piata Constitutiei, the same venue that hosted this year’s AC/DC show, which was attended by 60,000 fans. The concert is scheduled for July 10. For the moment, the pre-sale date for ticket purchase is December 10, exclusively for fan club members, reports bonjovi.com. The Bucharest concert is part of the 135 shows to be held during The Circle Tour, which started in February 2010 and will take in 30

countries. The tour is promoting the band’s most recent album of the same name, which was released in 2009.

With a 27-year career, Bon Jovi are one of the best known American rock (or so-called “glam rock”) bands in history. The band is made up of lead singer Jon Bon Jovi (John Francis Bongiovi, Jr.), guitarist Richie Sambora, keyboardist David Bryan, drummer Tico Torres, as well as current bassist Hugh McDonald, a lineup that has remained pretty much intact throughout the band’s career.

Corina Dumitrescu

Club Oxygen set to breathe again in new mall COURTESY OF CLUB OXYGEN

Pool, darts and bowling go well together

Club Oxygen will open a second outlet in 2012 in Promenada Mall, a forthcoming shopping center on Barbu Vacarescu Boulevard. The company expects a EUR 700,000 turnover for the first year. The first Club Oxygen location was opened in Bucharest, in Sun Plaza commercial center, in May, after a EUR 1.8 million investment, which the investors hope to recover in four years’ time, says Ion Tanasescu, the club’s general manager. The venue comprises a bowling alley, darts and pool area, as well as a restaurant, terrace and playground.

The advantage of the location, says Marius Piticariu, the local pool, darts and bowling champion who 22

helped develop the club, is that “all these three sports can be found in the same place, without being separate and thus practically promote one another”.

The 2,000-sqm location has eight bowling lanes, 20 pool tables and two darts boards, and also includes a 240sqm terrace. The restaurant initially focused on Italian food but has now broadened its palate with American so-called “finger food”.

The total investment in the current venue’s professional bowling and pool equipment – considered to be the most modern in Romania at the moment – reaches EUR 600,000.

Open Oxygen Tournaments are also organized at the location, for professionals and amateurs alike. Piticariu and Tanasescu have announced that a competition for Eastern Europe will be started in January 2011, with bigger prizes than the ones offered now (to reach an estimated EUR 2,0003,000 for the winner). One hour’s play costs between RON 29 and 100, depending on the date and time, with discounts for members.

Corina Dumitrescu BUSINESS REVIEW / November 1 - 7, 2010