FDI PLUNGED 63 PERCENT IN 2009 SAYS CENTRAL BANK, SEE PAGE 6 ENTREPRENEUR
LINKS
BALANCE
Beer is the amber nectar for Florin
State subway firm Metrorex has
Food for thought: cookery classes
Stoian, whose Berestroika pub is
more than EUR 2 billion of develop-
are the next big thing for Bucharest
toasting future expansion
ment plans to get on track
people hungry for new experiences
BUSINESS REVIEW See page 9
See page 11
See pages 18-19
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Risk Management event at the InterContinental Hotel.
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LAURENTIU OBAE
What we are working on
TALK TO US !
AGERPRES
Bucharest played host to the Danube Summit last week, at which delegates from 14 Danube countries reconfirmed political support for the future European Union Danube Strategy. Above, President of the European Commission Jose Manuel Barroso with President Traian Basescu
Business Review continues its Country Focus series by bringing together the investors that have been part of each Country Focus event so far. They will be joined by new guest speakers: top managers representing the most important companies in Romania. One of the conclusions of the various panel discussions was that although investors are facing hard times, there are lessons to be learned and changes to be made which in the long run will have a positive impact on the economy. Foreign investors have helped Romania develop since the revolution, their investments totaling EUR 45 billion, 30 percent of the local GDP, according to data from the Foreign Investors’ Council in Romania. They represent a strong force in the local economy, and will have the chance to make their voices heard at the Business Review Foreign Investors Forum. As it is a large-scale event, all sectors of the economy will be covered through a broad spectrum of topics. The first part of the event will consist of a panel discussion of an hour and a half which will cover labor and employment issues, perspectives on the local retail sector, energy investments, agriculture and tourism. The meeting will try to offer practical solutions to reversing the current difficult economic situation in Romania, and is oriented towards finding ways for businesses active here to cope with the recession. This session will be followed by a Business Review Club Business Mixer & Cocktail. Besides investors, the event is expected to attract top-level participants from the consultancy and legal industries, ambassadors and other high-profile members of the local business community. The Business Review Club is an elite business community built around the Business Review brand, producing magazine and editorial projects, online products and business events. Club members are entitled to a series of exclusive benefits. The Foreign Investors Forum will take place on December 7, at the Intercontinental Hotel. For more information about registration, please visit http://business-review.ro/events. 3
NEWS
URBB toasts 7 percent rise in sales in first three quarters
sults despite weakening market conditions.” The group reported that its EBIT of RON 336 million was 62 percent lower than in the same period of 2009 due to the impairment of Kazakh assets. This was based on the outcome of the technical assessment of the fields and the reestablishment of export customs duty in Kazakhstan, as well as higher depreciation, following significant investments made in the last 12 months. Dana Verdes
LAURENTIU OBAE
4
Mariana Gheorghe, CEO of OMV Petrom
Vodafone has almost 10 million customers
Vodafone Romania posted total revenues of EUR 425.7 million in the first semester of the 2010-2011 financial year, down 12.4 percent on the same period of the last one. EBITDA amounted to EUR 177.1 million and represented 41.6 percent of revenues. Service revenues fell to EUR 411 million, 13 percent down on 2009/2010. Vodafone Romania had a total of 9,839,000 customers at the end of September, a 3.2 percent growth on the previous year. Prepaid customers made up 63 percent of the total customer base, and postpaid clients the other 37 percent. The average revenue per user (ARPU) was EUR 84.1. Otilia Haraga
... as Rompetrol Rafinare losses grow
COURTESY OF ROMPETROL
URBB (United Romanian Breweries Bereprod) has announced that its sales went up by 7 percent in the first nine months of 2010 against the same period of 2009. Beer sales rose by 4 percent and soft drink sales by 2 percent. The month with the highest figure was August, when the beer segment hiked by 19 percent and soft drinks by 13 percent. “In the first nine months of the year, Tuborg, Carlsberg, Skol and Guinness developed their market share on their respective markets and Granini increased by 4 percent,” said Shachar Shaine, president of URBB & Carlsrom Beverage. According to company data, the imported brand segment is the only one that has registered growth this year. In 2010, consumers shunned to some extent super premium and premium brands while mainstream and local brands held up the best. URBB estimates that it will reach a 10.5 percent share of the local beer market by yearend. As for this winter, the recently launched Tuborg Christmas Brew is expected to boost sales by about 3-5 percent against 2009. URBB is present on the Romanian beer market with premium brands Tuborg, Carlsberg, Skol, Holsten, Guinness and Kilkenny, on the soft drinks market with the Granini brand and more recently on the bottled mineral water market with the Bilbor brand, which was launched this June. Simona Bazavan
Oil and gas company OMV Petrom posted EUR 27.6 million (RON 116 million) in losses in the third quarter of the year. The financial results reported by the firm in Q3 were affected by a one-off charge in Kazakhstan. While the clean EBIT was 7 percent lower than in the same period of last year, Q3 EBIT fell 62 percent due to the situation in Kazakhstan. “Our bottom line was adversely affected in Q3 by the impairment of Kazakh assets and FX losses due to USD loans given to our Kazakh subsidiaries. In the past months, in line with our strategic directions, we have made progress on the power project in Brazi and entered partnerships with internationally reputed companies to maximize production on selected mature fields, with cumulative production enhancement of 50 percent expected from the respective fields in the next five years,” said Mariana Gheorghe, CEO of OMV Petrom. She added: “For the rest of 2010, we will step up our investment efforts with a particular focus on E&P drilling in order to largely offset natural decline production whilst keeping our focus on cost management and financial discipline to ensure sound re-
COURTESY OF PETROM
COURTESY OF URBB
A lot of bottle: URBB increased its sales in the first three quarters
Petrom posts Q3 losses...
Vodafone Romania adds more customers, revenues still decline
Tough times on the energy market: Rompetrol Rafinare’s losses in the first three quarters are 29.1 percent bigger than during the same period of last year
Rompetrol Rafinare (RRC), part of the Rompetrol Group, has reported USD 139.6 million of losses for the first nine months of the year, a hike of 29.1 percent from the same period of last year. The company’s consolidated businesses grew 18 percent, to USD 2.1 billion. Rompetrol Rafinare and
Rompetrol Petrochemicals interrupted their activity on September 20, in order to carry out works related to the general scheduled overhaul. In the first nine months of this year, Rompetrol Rafinare's total exports, along with those of its subsidiaries Rompetrol Gas and Rompetrol Petrochemicals, reached
over USD 774 million, an increase of 10 percent over the same period in 2009. Rompetrol Rafinare paid USD 71 million in August for the bonds issued by the company under an agreement concluded between Rompetrol Rafinare and the Ministry of Finance in December 2003. Besides this sum, the company paid between 2004 and 2010 accrued interest on bonds totaling over USD 250 million. According to the legal requirements the bonds unredeemed by the due date (September 30, 2010) were converted into shares. Following this operation, the amount by which the share capital was increased was directly awarded to the Romanian state, specifically the Ministry of Finance, which became a shareholder in the firm, holding a 44.7 percent stake of its total share capital. Dana Verdes BUSINESS REVIEW / November 15 - 21, 2010
NEWS
Private equity investments in Romania stay in freefall
BUSINESS REVIEW / November 15 - 21, 2010
below the figure in the Czech Republic’s 1.017 percent of GDP. In Q4, 2009, Romania and Bulgaria saw a spike in annual funding attracted: Romania had private equity investments of approximately EUR 120 million, while Bulgaria attracted EUR 178 million. In late 2009, private capital injections involving firms in Romania amounted to EUR 220 million and EUR 184 million in Bulgaria. In the first three quarters of 2010, private equity grants in Romania accounted for about 55 percent of the investments of the same period last year, when they totaled EUR 101 million. The main sectors that have attracted private investment equity in Romania are: medical services and pharmaceutical industries (including grants, with about EUR 22 million), retail and consumer goods, construction, energy, communications and transport. In Bulgaria, the capital allocated to companies this year represents 26 percent of investments of the same period in 2009. Dana Verdes
LAURENTIU OBAE
Data released by a regional private equity body has shown that investments continue to decline in Romania. The Association of Private Equity and Venture Capital Funds in South-Eastern Europe (SEEPEA) announced that private equity funds active in Central and Eastern Europe (CEE) have capital under management of over EUR 4 billion, allocated to investments in the region. Such funds invested EUR 56 million in Romania in the first nine months of 2010. “We expect to see more flexibility from employers in evaluating their own businesses, while the economic recovery in Europe has not yet reached Romania and options for development and recovery companies have been reduced considerably in recent times,” said Irina Anghel, SEEPEA secretary general. In 2009, CEE private equity investments were at EUR 425 million. Private equity financing in the local market in 2009 represented 0.18 percent of GDP, under the CEE countries’ 0.22 percent of GDP, and far
BSE net profit slides 5.3 percent in first three quarters
The BSE’s profit has slipped over 5 percent
The Bucharest Stock Exchange (BSE) registered a RON 11 million (approximately EUR 2.6 million) turnover in the first nine months of the year, 23.7 percent up on the same period of 2010. Affected by smaller value transactions, net profit dipped to RON 6.17 million (about EUR 1.4 million), a 5.3 percent decrease.
While at the end of September 2009, the BSE posted an operating loss of RON 0.9 million (EUR 0.2 million), at the end of September 2010 it turned an operating profit of RON 2.1 million (EUR 0.5 million). “The first nine months of the year were affected by uncertainty, both externally and on the Bucharest Stock Market. This fact made many investors sit on the fence,” said Valentin Ionescu, general director of the BSE. He added that it had managed to “significantly” increase its turnover and post operating profit for another quarter, exceeding initial targets. Year-to-day results reflect an increase in revenues generated by higher tariffs on stock trading activities, income from stock information services and commission levied on issuers and participants in the trading system, said BSE representatives. Simona Bazavan
5
3Q Wojciech Zaremba business development director at PCC SE
What are PCC’s intentions regarding the privatization of Oltchim? From the moment PCC SE became a shareholder of Oltchim, in May 2007, it has been interested in participating in the firm’s privatization process. This was formally confirmed by a letter of intent submitted to the Ministry of the Economy in July last year, and it has been repeatedly and openly expressed by company officials. On November 1, PCC submitted to the ministry a new letter confirming once again its interest in participating in the privatization. What feedback have you received from the state authorities? PCC SE has not yet received any answer to its letter. We hope the privatization of Oltchim will start soon, that it will be done in a transparent way and according to European standards, and that all interested parties will be able to present their offers. We believe there is potential for a very strong synergy between PCC SE and Oltchim, especially in the polyols sector. Both companies can be much stronger together and can compete more effectively in the market with large competitors such as Dow Chemicals, Shell, Bayer and BASF. 6
UniCredit Tiriac Bank profit slumps 15 percent in first nine months UniCredit Tiriac Bank registered a EUR 52 million net profit in the first three quarters of 2010, 15 percent down on the same period of 2009, announced bank representatives. “Fiscal consolidation measures implemented earlier this year, although necessary, have had a negative impact on consumption, investments and the economy in general. The prolonged recession and shrinking incomes have had severe effects on the banking system, on the quality of assets and incomes,” said Rasvan Radu, CEO of UniCredit Tiriac Bank. The lender also reports a 15 percent revenue increase (EUR 245
LAURENTIU OBAE
What is Oltchim’s status and the situation of PCC SE as minority shareholder? The situation of Oltchim is very difficult. Total losses generated in the first nine months of 2010 surpassed RON 178 million. The total debt is now RON 2.19 billion and increased during the last quarter by RON 106 million. Oltchim urgently needs a restructuring plan. It must start functioning as a self-sufficient company, based on business standards and principles, following market trends and implementing modern technology solutions, instead of investing in outdated and shut-down plants like Arpechim.
NEWS
Banking on recovery: Unicredit’s profit is down
million) and a cost-to-income ratio
of 41.8 percent. Operating expenses went up by 1 percent. At the end of September the bank was managing assets worth EUR 4.7 billion, 1.2 percent more than in September 2009. Its loan portfolio amounted to EUR 3.1 billion, 13 percent more than in the first three quarters of 2009, while deposits reached EUR 2.2 billion. Credit risks continued going up yet remained under the system average, said bank representatives. Over 90-day on-balance sheet defaulted loans reached 11.5 percent. Related provision coverage grew to 7.1 percent under IFRS (International Financial Reporting Standards). Simona Bazavan
DCS opens support center for residential customers Telecom company Digital Cable Systems (DCS) has launched a national technical and commercial support center that will cater for the customers of its AKTA division for individual consumers. The center, located in Campulung Muscel, was opened following an investment of EUR 400,000.
The company started to develop the AKTA call center in March. Currently the focus is on developing new services and improving the quality of support services.“The growth of the business made it necessary to have a centralized system for registering customers’ complaints, to control and track how
these problems are solved. The AKTA call center serves all individual clients on the analog and digital TV services side, and is in full development for internet and telephony services,” said Dinu Malacopol, CEO of DCS.The call center currently has 20 employees. Otilia Haraga
FDI plummets 63 percent in 2009, says central bank Foreign direct investments to Romania in 2009 collapsed by 63 percent from the previous year, according to data released by the National Bank of Romania (BNR). The FDI net flow to Romania in 2009 amounted to EUR 3.48 billion, of which 49.6 percent was equity stakes and 50.4 percent net credit from foreign investors, according to the same source. Out of the total FDI equity flow, 98.3 percent (EUR 3.06 billion) went into corporate development, 1.1 percent (EUR 34 million) on mergers and acquisitions and only 0.6 percent (EUR 19 million) to greenfield investment. At the end of December 2009, FDI stock reached EUR 49.98 billion, of which 71.2 percent was equity stakes, including reinvested earnings, and the remaining 28.8 percent net credit received from foreign investors. By economic activity, the bulk of FDI went into manufacturing (31.1 per-
cent), out of which the largest recipients were: oil processing, chemicals and rubber and plastic products (6.3 percent), metallurgy (5.2 percent), transport (4.7 percent), food, beverages and tobacco (4.1 percent) and cement, glassware and ceramics (3.3 percent). “Despite their large potential, certain sectors, such as textiles, clothing and leather goods (1.4 percent of total FDI), still hold a rather small share of FDI,” reads the BNR report. Other industries that have attracted significant FDI are financial intermediation and insurance, which account for 19 percent of total FDI stock, construction and real estate transactions (12.9 percent), trade (12.3 percent) and information technology and communications (6.5 percent). Data about the regional dispersal of FDI reveals considerable disparities between geographical regions with the Bucharest-Ilfov region sucking up 63.4
percent. Other development regions benefited from FDI inflows as follows: the central region (7.4 percent), south (7.2 percent), west (6.2 percent) and south-east (5.9 percent). As for the top investors to Romania, the biggest five countries by share of FDI stock as at 31 December 2009 were the Netherlands (21.8 percent, up from 17.2 percent in 2008), Austria (18.1 percent of total stock at the end of 2009, down from 18.8 percent a year earlier), Germany (13.4 percent down from 15.4 percent in 2008), France (8.5 percent, the same as in 2007), and Greece (6.6 percent, staying flat year on year). In the first nine month of 2010 nonresidents’ direct investment in Romania amounted to EUR 2,07 billion (as compared with EUR 3,4 billion over January-September 2009) and covered 48.9 percent of the current account deficit of the first three quarters. Simona Bazavan BUSINESS REVIEW / November 15 - 21, 2010
CALENDAR / WHO’S NEWS
EVENTS, BUSINESS AND POLITICAL AGENDA NOVEMBER 16 é The Chamber of Commerce and Trade of Romania (CCIR) together with the
Japan External Trade Organization (JETRO) to Bucharest, the Embassy of Japan in Romania and the Union of Bilateral Chambers of Commerce and Industry of Romania (UCCIBR) organize a seminar on environment-related business opportunities.
WHO’S BOGDAN MIHAIL has been appointed president of Smithfield Romania, covering Smithfield Ferme, Smithfield Prod, Agroalim Distribution and Agroalim Logistics. Previous-
NEWS ly GM of Smithfield Ferme for the past three years, he has wide experience in FMCG, business development, management, production, marketing and distribution. He is a graduate of Carol Davila Medical School, and in 2001 graduated from the EMBA program of Asebuss.
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
NOVEMBER 17-18 é TotalSoft organizes the “Zilele Charisma” event at Radisson Blu Hotel. By invi-
tation only.
NOVEMBER 21 é 17:00 AmCham Romania organizes the Thanksgiving Day Dinner Party at the
InterContinental Hotel. By invitation only.
NOVEMBER 23 é Procter & Gamble celebrates 15 years since the opening of its factory in
Timisoara.
Broadcasters must play 40 percent local music A draft bill forcing Romanian radio stations to play songs by local artists was passed on a technicality by the Chamber of Deputies last week, reports Mediafax newswire. The term for debate and approval had been set for November 3 and when the date passed, the initiative was considered valid and passed into law. The legislation stipulates that broadcasters operating under Romanian jurisdiction must dedicate 40 percent of airtime to local music, not including the time given over to information, sports events, advertisements, teleshopping
and teletext programs. It applies only to primetime, 18.00-22.00 for television channels and 6.00-14.00 for radio stations. The bill was spearheaded by MPs Raluca Turcan and Brandusa Novac (of the PDL, Liberal Democratic Party), Victor Socaciu and Madalin Voicu (PSD, Social Democratic Party) and Cristian Topescu (PNL, National Liberal Party). Similar legislation is in force in France, where local broadcasters must play 40 percent of their songs in French, during primetime hours. Corina Dumitrescu
Severina Pascu becomes CEO of UPC Romania, Jack Mikaloff retires had held various positions for Liberty Global such as CEO of UPC France and manager of the business division of UPC Europe. Currently, UPC Romania has more than 1,156,000 customers in 200 cities. Otilia Haraga
COURTESY OF UPC
Severina Pascu, current CFO and future CEO of UPC Romania
Severina Pascu, currently CFO of UPC Romania, has been appointed CEO of the company starting January 1, 2011. She will be replacing Jack Mikaloff, who will retire at the end of the year. According to Mikaloff, the new CEO has played “a substantial part in UPC over the last three years.” Mikaloff took the helm at UPC Romania in 2008. Prior to this, he BUSINESS REVIEW / November 15 - 21, 2010
Severina Pascu Severina Pascu has been CFO of UPC Romania since 2008. Between 2005 and 2008, she was manager of CAIB Romania, one of the main investment banks in Central Europe. From 2000 to 2005, she was part of the management of the American cable telecommunication company Metromedia International. Severina started her career in 1996 at KPMG Romania before moving to Great Britain. She graduated from the Bucharest Academy of Economic Studies. 7
ENTREPRENEUR
Beerhouse gives market a taste of things to come FLORIN STOIAN intends to make Berestroika a strong brand on the local beerhouse market, with the opening of two new locations in 2011 – one in Bucharest and the other in Timisoara or Sibiu – next on his agenda. Anca Ionescu
8
LAURENTIU OBAE
Florin Stoian, general manager of Berestroika, began his entrepreneurial journey in the Horeca industry in 2008, when he decided to set up the Berestroika pub. But his CV also boasts other business experience: Stoian spent several years working in GSM retail. He graduated from the Faculty of Economic Studies in Bucharest but was always tempted to go into business, a world that he learned a lot about as an employee of different companies. A few years ago, Stoian and his cousin Florin Gugiu established FutureCom, a company specialized in distributing and topping up mobile phone SIMs. But they were forced to close the business in 2008 because of pressure from the larger GSM operators. This was the moment when he switched his attention to the Horeca industry, setting up Berestroika. “After we decided to close the GSM business, Florin Gugiu and I decided to go to a trade fair in Hannover. There we discovered the charm of beerhouses. Because we wanted to open a restaurant, we decided to launch a completely different establishment than what the market could offer at that time,” remembers Stoian. Soon they happened upon the ideal location for Berestroika. The arrangements were finalized in November last year, with the location being totally redecorated and the main architecture maintained. The pub – actually a micro-tap house – was launched under the concept of providing unfiltered, homemade beer and natural, fresh and “green label” food. The investment in the premises alone was about EUR
200,000, a fraction of the EUR 500,000 the two entrepreneurs put up from their personal financial resources. “We were inspired by the Austrian and German business models. We wanted to offer natural, ‘homemade’ beer on the local market, based on original German recipes, natural food and high quality entertainment,” says the young entrepreneur. He adds that the natural, environmentally friendly food was intended to be the engine of their business while the beer was meant to be the second unique ingredient. “Together, the beer and food create Berestroika, a strong brand that is able to rapidly develop,” says Stoian. “Beer is just one attraction of Berestroika because we have created a complete concept: good food, unique beer, music and entertainment of high quality.” Stoian says the biggest difficulty was to find people able to perfectly understand the partners’ business philosophy and what they really wanted to communicate through the Berestroika brand. “Besides this, it all had a natural course. We had run other businesses and we already knew the main difficulties a start-up business might face. But we took measures to counteract any negative effect,” says the entrepreneur. If he started another business, he probably wouldn’t change anything. “I love what I do. I like the effect that Berestroika has had on its market and I like that Romanians are starting to understand some elements of the ‘beer culture’,” adds the businessman. He says that there are plenty of daily challenges in the services industry. “First, the most important thing is to satisfy your customers, to make them come back
to your restaurant. Last but not least, my biggest challenge as an owner is to continuously keep the level high and not allow the quality of our services to fall,” explains Stoian. The cousins’ business is in a very competitive industry, and so their challenges are even greater. And they need to permanently focus on their customers’ needs. “As you know, the restaurant market in Bucharest is pretty crowded, with the beerhouse segment home to several established brands that are helped by their name and history. As for us, our business is positioned on a market niche and we intend to achieve about 20 percent of the market share of the leader of the beerhouse segment in Romania,” says the general manager. Stoian thinks that the natural food and beer are the main things that differentiate Berestroika from the crowd. Plus, customers find an enjoyable atmosphere with Bavarian music almost every night. The entrepreneur says that because Berestroika is a young business, active on the local market since No-
vember 2009, he cannot estimate its market share. But the owners have big plans. “What do we intend to do? Well, we want to teach Romanians how to appreciate the concepts of healthy food and natural, draft and unfiltered beer. Our target is people with medium and high incomes who want to spend a quality time in a discreet location.” Going forward, Stoian says the partners intend to launch a second Berestroika beerhouse in Bucharest next year and another one in Timisoara or Sibiu, most likely at the end of 2011.
Berestroika: é Established: 2009 é 2009-2010 turnover:
EUR 600,000 é Number of employees: 20 é Initial investment:
EUR: 500,000
BUSINESS REVIEW / November 15 - 21, 2010
PROPERTY Strabag and Straco Grup ink EUR 220.6 mln contract with CNADNR
Auchan partners K&S Developments to build EUR 90 mln Electroputere Parc Craiova commercial park
Auchan will open an 11,000-sqm hypermarket
pean Retail Park Targu Mures, ERP Braila, ERP Focsani, Hello Shopping City Bacau and ERP Severin. Through the sale, Electroputere Craiova aims to cover its historic fiscal debts, which date from before its
Oasis Development opens EUR 7 million Family Center in Giurgiu
Retail developer Oasis Development in partnership with Real4You Immobilien Austria has opened the Family Center commercial center in Giurgiu following a EUR 7 million investment. Family Center Giurgiu has a built surface of 4,328 sqm, a rentable space of 4,260 sqm and 430 parking places. It targets both inhabitants of Giurgiu and those coming from across the Bulgarian border. Over 20,000 visitors are expected on the center’s opening day. Brands that have opened outlets in the facility are Kaufland, Takko, Deichman, Carmolimp, Altex, Animax and 10
The road is part of a Pan-European Corridor
Strabag, Straco Grup and the National Company for Highways and National Roads (CNADNR) have signed an agreement for the construction of the Deva-Orastie detour road. The deal is worth EUR 220.6 million including VAT, of which some EUR 133.6 million is coming from the European Commission. It is the largest project financed by the CNADNR from European funds. According to the agreement the deadline is in 24 months. The Deva-Orastie section of road is located on the Pan-European Corridor IV Bucharest-Constanta-Nadlac. Dana Verdes
Immofinanz’s Gold Plaza Baia Mare begins trading
COURTESY OF IMMOFINANZ GROUP
LAURENTIU OBAE
Trolley dash: over 20,000 visitors are expected on the center’s opening day
DM Drogerie. The project is anchored by the Kaufland store, construction works on which were finished in March. The project’s renting agent was Kramer&Wagner. “Family Center is a concept targeting families on low and average incomes. It has been successfully implemented in countries such as Austria, Hungary, the Czech Republic, Slovakia and Croatia, and it is now on a similar track in Romania. Three projects of this type, developed by Oasis Development, will be inaugurated this year in averagesize towns across Romania,” said Kurt Wagner, partner at Oasis Development. Oasis Retail Development & Consulting has delivered over 60 projects to date. The company has delivered ventures with a total surface area of over 1.5 million sqm, and an investment value of over EUR 800 million. Its current portfolio includes over 200,000 sqm of retail space in construction works and territorial development. In the next three years the firm plans to develop over 100 commercial centers and retail parks throughout the country. Since 2002 Oasis has been the partner of Kaufland and Plus in Romania, having developed over 50 commercial centers for them.
privatization. “Selling 12 of the 62 hectares of the Electroputere platform does not affect the company’s industrial activity, as it is part of the consolidation and restructuring process started two years ago,” said Adrian Gabriel Dumitriu, general manager of Electroputere. Electroputere Parc Craiova is located on one of the main boulevards in Craiova. The main anchors of the commercial center are Auchan, which is building an 11,000-sqm hypermarket, sports retailer Decathlon, which will have a 3,500-sqm store, largesize clothing retailer Kiabi, which will have a 1,800-sqm location, interior decorations retailer Leroy Merlin with a 10,000-sqm shop, and car service and equipment company Norauto with a 1,100-sqm outlet. The total built surface of the center is 6.3 hectares, and it will have 2,000 parking places.
LAURENTIU OBAE
LAURENTIU OBAE
French retailer Auchan has signed a partnership with K&S Developments to acquire 12 hectares of the land owned by Electroputere SA Craiova, on which it will build a commercial center set to open in the second quarter of 2011, the retailer announced. The Electroputere Parc, which requires an estimated investment of EUR 90 million, will be constructed on the site of the former plant in Craiova. It will have a built surface of 6.3 hectares. Besides Auchan, other brands that will open stores in the center are Leroy Merlin, Decathlon, Kiabi and Norauto, all of them partner brands of Auchan. K&S Developments is entirely owned by companies in the hands of Kris Carton and Steven Van Den Bossche. As managing partners of Belrom Retail Estate, they have developed Sibiu Shopping City, Euro-
Eduard Zehetner, CEO of Immofinanz Group
Immofinanz Group has opened the Gold Plaza shopping and entertainment center in Baia Mare. The project was developed by Immofinanz in partnership with Hungarian Futureal. Gold Plaza Baia Mare has more than 30,000 sqm of rentable space and includes 100 retail shops, a large gastronomy zone and an extensive movie theater and entertainment area. The occupancy rate had reached nearly 80 percent by the opening date. Local and international tenants include C&A, New Yorker, Deich-
mann, Takko, Leonardo, Waikiki, Domo, House of Art, San Francisco, Fox, Douglas, Centrofarm and Orsay. The mall serves a catchment area with a population of more than 1.2 million. It includes a multiplex movie theater, bowling lanes and a large entertainment area. It also has a casino, a fitness center with a view of the nearby mountains and a modern food court. The center is located between Strada Victoriei and Independentei Boulevard, two main traffic arteries that connect the eastern and western sides of town. With 140,000 residents, Baia Mare is one of the largest cities in northwest Romania. Eduard Zehetner, CEO of Immofinanz Group, commented: “For residents of the region, it is not only a shopping and entertainment center but – much more importantly – an important economic stimulus.” The shopping center is one of only three openings in Romania during 2010, although 120 projects were originally planned. Immofinanz hopes that its position, with a catchment area of over one million residents within roughly one hour’s drive away, will support the project. BUSINESS REVIEW / November 15 - 21, 2010
LINKS
Metrorex aims to get system expansion back on track
Dana Verdes For a country that is part of the European Union community not to have a metro line that links the capital’s international airport to the city is nothing to be proud of. It is clear to those who want to see it that the current metro transportation system leaves a lot of room for future developments and improvements. But squint really hard and you might see a little light at the end of the tunnel, as the state-owned company Metrorex has announced plans to more than double the number of lines, on the long-run. The company plans to build an M5 line between Ghencea and Pantelimon which would open in 2014, an M6 route between Rahova and Colentina and an M7 between 1 Mai and Otopeni.
THE
PLANS ON PAPER
The M5 will run from the Ghencea/Drumul Taberei district BUSINESS REVIEW / November 15 - 21, 2010
Subway company Metrorex needs EUR 2 billion for network development, just for starters
via Eroilor and Universitate to Pantelimon, the terminus of the M1. It will have 19 stations, be 18-19 km in length and intersect with all existing lines except the M4. The M5 is currently in its planning stage, with construction expected to begin by 2010 and conclude by 2020. The route is expected to cost EUR 740 million. The urban area plan for Drumul Taberei line was recently approved by the general Council of Bucharest. The M6 will serve Bucharest’s two main international airports: Henri Coanda and Aurel Vlaicu. Henri Coanda (known popularly as Otopeni), the country’s largest airport, is currently served only by buses and CFR trains, while Aurel Vlaicu (Baneasa) is served by RATB buses and trams. The metro extension will be convenient because both airports are located north of the city and hence a single metro extension could serve the pair, facilitating transfer between them. The line would also go via the Piata Presei Libere, Pajura and Baneasa areas, as well as some northern Bucharest suburbs. Works were scheduled to start in 2007 and be completed in seven years. The cost of the line, which
LAURENTIU OBAE
State-owned subway company Metrorex has development plans worth more than EUR 2 billion for the next decade. Top of the priority list for investment are the Drumul Taberei subway line and the route that will link the two international airports in the north of Bucharest with the rest of the city. The company is also making short-term changes in its strategy to cover its RON 180 million of losses from poor contracts.
will have a length of 13.9 km and 14 stations, should be EUR 1 billion. The construction of the M7 is still under debate. It is supposed to run from Rahova to Colentina.
DRUMUL TABEREI
GETS IN ON
THE ACTION
One part of Bucharest currently in the metro wilderness is Drumul Taberei. Patience is required by the passenger who wants to travel between this neighborhood and downtown either by bus or car. But recently, Metrorex has taken tangible measures to start work on the Drumul Taberei subway network. The company received four final bids for the construction of the M5. According to company information, the winner will be selected in two months. Among the runners and riders is the Turkish-Russian consortium Dogus-Gulermak-Moscovskii-Metrostroi-Salinia which has put a RON 1.076 billion offer and a 22-month timeline on the table. Another bid came from the association between Strabag (Austria) and Straco Grup (Romania), who are asking for RON 1.94 billion and say they will finish the line in 30 months. Meanwhile,
Astaldi (Italy), FCC (Portugal), Delta ACM (Romania) and AB Construct have proposed RON 918.93 million and a 25-month deadline. Aktor of Greece has announced that the execution time would be 25 months and the sum RON 1.009 billion if Metrorex chooses it as the final contractor of the M5. The sums do not include VAT, according to Metrorex information. “The final bids are under consideration and we expect to have signed contracts for this project at the beginning of the year. In less than five years I think we will be able to travel by metro to this area of Bucharest and I hope we can find manufacturers who work well,” said George Udriste, Metrorex GM. The company has announced that the project will be funded by the European Investment Bank (EIB). For the construction of the M7, Metrorex wants to organize an auction for prefeasibility and feasibility studies. Building the Rahova-Colentina mainline is estimated to take about eight years. This subway line will be around 21 km long and will most likely take in 31 stations. Metrorex forecasts that the technical and economic indicators needed to start works will be ready in 12 months. Company officials are even talking of an M8 line, a south half ring. Its route has not been fully planned yet, but it is predicted to run through Piata Sudului and end at Crangasi and Dristor stations. It remains to be seen how and by when these plans will reach fruition, as Metrorex has run up losses of RON 180 million so far, RON 116 million for 2009 alone, and by the end of the year its debts could reach RON 188 million, mainly generated by a bad maintenance contract with Alstom Transportation. The company’s action plan: raising fares (which has already been done), adapting schedules according to traffic demand and attracting new sources of advertising. 11
HEALTHCARE
Private medical services in rude health While the public healthcare system is ailing, the market of private services is in robust health. The recession has not really stemmed the flow of people leaving the flawed public system for private care, and the private healthcare operator market is seeing takeovers and new openings. COURTESY OF CMU
Insiders told Business Review about the challenges they face when dealing with state measures. Otilia Haraga The value of the pharmaceuticals delivered in Romania in the first nine months of the year reached RON 7.3 billion by distribution price, up 24.2 percent y-o-y, according to findings from the Pharma & Hospital Report released by Cegedim Romania. The growth rhythm has slowed since the middle of the year, following steps to reduce public support for subsidized medicines. The total value of drugs released to patients in the third quarter of this year stood at RON 2.41 billion, up 20.4 percent compared to Q3 of the previous year. The growth is due mainly to the segment of prescription drugs, which was worth RON 1.83 billion, up 23.8 percent. OTC (over the counter) products posted a value of RON 0.32 billion, up 15 percent, while the hospital sector 12
The bigger picture: X-ray laboratories are one area of Romania’s growing private healthcare market
stood at RON 0.26 billion, up 10.7 percent compared to the third quarter of 2009. Between October 2009 and September 2010, the entire market stood at RON 9.52 billion, up 21.6 percent y-o-y. For the pharmaceuticals released on prescription segment, the growth rate was 27.4 percent, for the OTC sector 10.7 percent, and 2.6 percent for the hospital segment. Topping the hierarchy of company sales on the local market is Sanofi-Aventis (including Zentiva and Sanofi-Pasteur), with 12-month sales standing at RON 891.4 million. Roche posted sales of RON 873.8 million, while Pfizer (including Wyeth) had sales of RON 636 million. Novartis posted sales of RON 583.9 million, GlaxoSmithKline of RON 581.3 million, Servier of RON 484.2 million, Merck&Co of RON 439.5 million, AstraZeneca of RON 366.2 million, Daiichi-Sankyo of RON 348.2 million and Abbott of RON 266.6 million. The next ten position are taken up by Bayer, An-
tibiotice, Lilly, Menarini, Krka, Johnson & Johnson, Labormed, Richter Gedeon, Actavis and Reckitt Benckiser. No major changes are foreseen on the pharma market, says Dragos Dinu, shareholder in consultancy practice Link Resource. “The pharma industry is reeling after a spiral of regulations over the last few years and needs more predictability. However, the authorities typically act in an unpredictable way, under the pressure of the moment and the budget,” he explains. In the pharma industry, spectacular growth over the coming years is unlikely unless the process of market consolidation is re-started, especially in retail and among the producers of generic medicines, where the impetus before 2006-2007 has died down, with a few notable exceptions, says Dinu. The industry is struggling as the sum allotted to the health sector from the GDP is far from sufficient. The sector also suffers from a lack of predictability, which is due mainly to the lack of a strategy in this field. There is also an absence of
regulations and fiscal deductions that should provide impetus for the private health insurance market. The market of private health insurance is not in top form. This year it is tipped to decrease by 8-10 percent to RON 20-22 million, which would bring it to a level last seen in 2005. In 2011, the market is expected to remain at the same level as this year, both from the point of view of gross subscribed premiums and the number of insured individuals, according to Carmen Radu, deputy general manager of Eureko Romania. Elsewhere, Agata Jakoncic, country manager at Merck, Sharp & Dohme (MSD), mentions “the overtaxation of the pharmaceutical companies,” which is “unique in the world – everywhere else the clawback is related to the reimbursed value of the medicines”. She says that Romania has minimum European prices and very long payment terms (as much as 300 days in some extreme cases). Therapeutical reference pricing puts patients in a very difficult situation, she adds. Other insiders take a similar weary tone. “The worst problem is the lack of transparency regarding clawback. We, local medicine producers, are paying profit taxes to the Romanian state, and yet international companies are not paying these taxes. We are now forced to also pay this clawback as a supplementary tax,” says Stephen Stead, CEO and president of the Labormed administration board. According to Dinu, it is necessary to reform primary care, which is the first interface of the system with the patient. If done properly, this reform could reduce costs that can later appear in the system, says Dinu. Nor is the system equal everywhere. In rural areas, primary care, pharma & medical services are lagging behind. This should be part of a national strategy that is currently nonexistent, says Dinu. Once reform of the healthcare system is underway, it will take at least seven-eight years, according to Radu. The current legislation needs to be modified and application norms drawn up. After this, the sysBUSINESS REVIEW / November 15 - 21, 2010
HEALTHCARE tem will have to be perfected, as has happened in other European countries. “The success of such a reform cannot happen without the involvement of all the elements on this market – medical staff, pharmacies, medicine producers, civil society, medical service providers, private insurers and, last but not least, the National House of Health Insurance and the Health Ministry,” she says. Bureaucracy is a particular burden. “The over-regulation of this industry is a disadvantage, especially when guidelines are not used as guidelines but act as norms that restrict the activity of local companies rather than offer support and coordination so that they can become more competitive on a European and regional level. If the authorities really want this country to have a chance, they must introduce a proper financing system, control expenses transparently and annihilate corruption and waste in the healthcare system” says Stead. The health industry also faces a shortage of qualified staff, as medical professionals are leaving to work abroad.
BUSINESS REVIEW / November 15 - 21, 2010
“I think the most acute personnel issues lie in the public sector as medical workers are migrating out of the country or towards the private sector, says Dinu. One noteworthy fact is that in the private medical services sector nearly all entrepreneurs who have started businesses in this domain are still active in management. As the market develops, it will probably involve a transfer of such duties from the entrepreneur or founder to specialized management, even more so because private investment funds are making their presence felt, he adds.
M&AS,
NEW UNITS AND FUTURE EXPANSION
Recent data indicate that many Romanians would rather be treated in private clinics than by the state system. The latest report from IMAS Marketing and Surveys found that 44 percent of Romanians said they preferred private clinics, 51 percent would use state institutions while the remaining 5 percent did not answer the question. In Bucharest, 52 percent of respondents said that they would
rather be treated in a private clinic. People who prefer private centers are typically aged between 18 and 44 and come from small and average sized towns with over 50,000 inhabitants. They have higher education and a good social status, with monthly earnings of more than RON 750. However, the number of Romanians who go to the doctor annually is still very low: 20 percent of the people interviewed said they go to the doctor only once a year. Approximately 30 percent see their doctor two or three times a year while 29 percent visit a medical practitioner five-six times annually or more often. Of the people who were questioned, 13 percent said they never go to the doctor throughout the year. In Bucharest, one interpretation of the figures is that people take better care of their health, with 40 percent of citizens in the capital going to the doctor five-six times or even more a year, while in the rest of the country only 30 percent do so. “Romania is well represented in certain segments such as general medicine clinics, maternity wards, X-ray centers and laboratories. It is
in a less developed state, however, where high-performance services are concerned, says Marina Otelea, general manager of Medicover. Dinu believes that growth on the market of medical services has been impressive in recent years and will most likely continue over the next few years. The main reason he sees for this is the obvious flaws in the public system. But the market is still small. The largest player on this market will probably post a turnover of around EUR 30 million this year, he adds, by way of illustration. “I am convinced that we will see new acquisitions and notable projects for another two-three years at a sustained rate,” says Dinu. The plans of major players seem to be in tune with this prediction. Next year MedLife will continue its expansion by opening three hospitals in Bucharest and another in Brasov. “In the capital, we will have a pediatrics hospital in Baneasa, a urology hospital in Obor and a large hospital with 120 beds, six surgical wards and an emergency section,” says Mihail Marcu, president of
13
HEALTHCARE
MedLife. The firm will also inaugurate a hyper-clinic in Bucharest, in the Titan district, and another in Cluj. Further plans include developing a new compound of luxury selfcontained apartments in the maternity section of the already operational Life Memorial Hospital in Bucharest. And a new operating theater will be added to the MedLife hyperclinic, which is set to require an investment of approximately EUR 1 million. “Most of our clinics function in spaces we have rented or purchased. From many points of view, it is quicker and more practical this way. Naturally, we also consider the area in which we wish to expand – if it allows a new construction or if it is easier to buy an existing building. In Bucharest it is rather hard to find spaces fit for construction in an area close to the center, which should be accessible and allow clients direct access,” says Marcu. MedLife will also expand its chain of PharmaLife pharmacies, which currently numbers four units. Next year the company will open pharmacies in other cities – Brasov, Cluj and Constanta. The budget for these investments will be EUR 20 million, of which EUR 10 million has come from the company’s own funds. The other EUR 10 million is financing from the International Finance Corporation, which is a MedLife shareholder. “Most of the projects we implement are done with our own funds. We have very few bank loans. We are a company with a very good liquidity level as cash is generated by 14
the large weight of the paid-for service segment,” says Marcu. This summer MedLife took over an outfit in Brasov, Policlinica de Diagnostic Rapid, which runs one clinic and two laboratories. “The transaction was in excess of EUR 3 million and will definitely be followed by other acquisitions by the end of this year,” says Marcu. MedLife has nearly 1,500 employees, most of whom work full time. Four fifths of the personnel are medical staff. Prominent specialists or those who work in niche domains are recruited through “sources”, either following recommendations from doctors working for the firm or at managerial levels, but most employees are recruited via HR. Aside from the Marcu brothers, the firm has two more shareholders: the IFC, the investment and consultancy division of the World Bank, and SGAM Eastern Europe, a private investment fund of Societe Generale Asset Management, a subsidiary of Societe Generale Group. MedLife posted a EUR 26.2 million turnover for 2009 and estimates a 40 percent growth in its turnover this year. “The entrance of private equity funds to the shareholding structure of the top two players on this segment, MedLife and Centrul Medical Unirea (CMU), will accelerate the development strategy by expanding nationwide operations, starting from big cities,” says Dinu. The expected advent on the market of private health insurance and the introduction of in-system copayment for services that for the moment, at least theoretically, are free, are other factors tipped to in-
COURTESY OF CMU
COURTESY OF CMU
Welcome home: attracting professionals back from abroad is a priority for many local medical firms
A significant proportion of Romanians say they prefer to go private for their healthcare
fluence private medical services positively. This March, investment fund Advent International acquired 80 percent of CMU. Centrul Medical Unirea has drafted an investment plan for the next two years that exceeds EUR 20 million and intends in particular to acquire medical equipment and attract mid-level and highly specialized medical staff. “After the merger with Euroclinic, no further acquisitions are planned for 2010. Next year we intend to develop our hospitals,” says Wargha Enayati, general manager of CMU. The firm recently announced that it had taken over from insurer Eureko the Euroclinic Hospital and Euroclinic Medical Centers in Romania. Euroclinic ran a hospital and three medical centers. It has 350 employees and posted revenue of about EUR 8 million in 2009. CMU also opened a new medical unit in Bucharest, CMU Dorobanti, following an investment of approximately EUR 1 million. Located on Dorobanti Avenue it consists of a pediatrics hospital with a capacity of 10 beds, a polyclinic and a diabetes center for children and adults. When making an acquisition CMU typically uses a mix of reinvested profit, bank loans and capital from shareholders. However, it used mainly reinvested profit and capital from shareholders to finance these moves. CMU currently has 1,000 employees. The medical staff represents a mix between people who only work for CMU and those who are also employed in state hospitals. Mainly, the personnel is recruited
through recommendations. CMU is attempting to attract back Romanian doctors who have emigrated abroad, after they learn certain techniques and skills which bring added value for the patients. CMU posted over EUR 10 million in total income for the first six months of the year, a 36 percent increase on the same period of last year. The company’s best performing unit was CMU Regina Maria Maternity which posted a 132 percent turnover growth. At the beginning of the year, A&D Pharma announced plans to tap into the private medical services market with a new dedicated division, Anima Specialty Medical Services. The company has so far opened four clinics in Bucharest and a central laboratory. By the end of the year the number of doctors in the Anima clinics was set to surpass 300. A&D Pharma posted sales of EUR 482.2 million in the first nine months of this year, which represented a 32 percent growth on the same period of last year. These revenues also include the EUR 16.7 million third quarter revenues from newly acquired marketing & sales operations outside Romania. On the wholesale segment, where it is represented by Mediplus, the group posted an increase of 47 percent to EUR 391.4 million in the first nine months of 2010. The marketing & sales division recorded unaudited revenues of EUR 11.4 million. On the retail side, where the group’s operator is Sensiblu pharmacies, sales rose 32 percent to EUR 179.3 million for the first nine months of 2010, as compared with EUR 135.7 million BUSINESS REVIEW / November 15 - 21, 2010
HEALTHCARE
BUSINESS REVIEW / November 15 - 21, 2010
the first functional hospital in mid2011. New clinics in Bucharest will follow, and we will continue regional expansion,” says Otelea. She adds that the company will enter certain cities through acquisitions. Medicover has recently completed the acquisition of land on which it will build its hospital in Bucharest, which the company says will be larger than the existing private hospitals in the capital. “After the opening of the Warsaw hospital it is the second largest project Medicover is undertaking in the coming period,” said Otelea. Currently, Medicover has approximately 800 employees. “We recruit medical staff both in and out of the country. Usually, there are doctors who go to work abroad and after a period they want to return home. Unfortunately, the balance is tipping towards those who leave the country instead of those who return: we can only hope that in the future we will manage to reverse this trend. Some of the doctors work both in the private and public sector. However, lately most prefer to work only in the private healthcare,” says Otelea.
Major legal changes in healthcare, past and future é The methodology for calculating the price of medicines introduced on April
1 remains unchanged. The price in RON of imported medicines is calculated at an exchange rate of RON 4.25 per EUR, RON 3.06 per USD and RON 2.80 per CHF. é A therapeutic reference price was introduced in July 2010 for prescription
medicines for acute afflictions (lists A and B). The therapeutic reference price for medicines for chronic diseases (the C1 list) came into force in October. é The implementation norms of the clawback mechanism were approved at
the end of June 2010. These stipulate that the license owner who sells subsidized medicines will pay the state a percentage of the turnover generated by all the prescription drugs it sells. This should have been applied retroactively from January 2010. However, this measure has not yet been applied. é From July 1, VAT was increased from 19 to 24 percent for products except
prescription medication, where it stays at 9 percent. é The IMF prompted the government to approve in August the payment of
EUR 454 million in arrears in the health system. é Co-payment may be applied for all medical services from next year. This is
still in the draft stage.
SOURCE: A&D PHARMA
for the same period in 2009. Local operators are also active in newer areas of medicine. This year Biogenis opened a new stem cell storage bank. Until then, the firm had stored stem cells in its bank in Poland. “In our domain, Romania is a very dynamic market and has had constant growth in the three years since Biogenis has been operational on this market. We hope in twothree years to bring in further investments of approximately RON 2 million and over the same period we want to increase our personnel by approximately 20 people,” said Jakub Baran, president of the Polish Bank of Stem Cells. Biogenis is the third cell storage unit in Romania, after Eurocord and CMU. The local market is home to other specialist players. In October, West Eye Hospital Group opened the first ophthalmology hospital in Bucharest, West Eye Hospital. The hospital took two years to build and covers 1,400 sqm. The West Eye team in Bucharest comprises 10 specialty doctors. After opening a central laboratory, Medicover will start a hospital unit project next year. “We will have
15
Industry Leaders: STOICA & Asociatii Fidelitas, Integritas, Fortitudo
LAURENTIU OBAE
How did you decide to start up this law firm 15 years ago? What was the main impetus to this and how has the entrepreneurial experience been so far? What was your experience before deciding to set up the firm? Until 1990, the legal practice was very much restricted both by law and by the authorities. The experience as practicing lawyer during the communist regime was limited but still sufficient to dream to a liberal practice immediately after 1990. I was at that time specialized in civil law litigation and I also started to extend my professional experience in commercial law as this area of law at that time proved to be the future of the legal practice. The new law on the legal profession, providing the liberalization of this practice, was issued in 1995; together with my husband, Valeriu Stoica, professor at the Faculty of Law of the University of Bucharest, we established the law firm STOICA & Asociatii in November 1995, being among the first lawyers registered with the Bucharest Bar. We had one associate lawyer working with us, who is now one of our partners-Catalina Dicu and one secretary. Our office was a two room apartment at the 7th floor in a building in Calea Victoriei. We were working more than 14 hours every day. We learned day by day and month by month. It was hard but it was a great time for us.
Cristiana Stoica, Founding Partner STOICA & Asociatii
during the period 1997-2000, when my husband and partner, Valeriu Stoica, was nominated Minister of Justice. During his mandate as Minister, I had to manage alone the law firm and in the same time to be aware of the restrictions imposed by having Valeriu as Minister. This limited a lot the practice of the law firm. However, we did a great number of interesting projects in advisory work: the assistance as local lawyer to European Bank for Reconstruction and Development in the financing of Mobifon; the assistance to Shell in opening their GPL business in Romania; or the assistance to the first State bond issuance in Romania on the international market. Also, we developed our expertise in restitution disputes and in complex commercial litigation. The basis of our business law practice was established during those years and this was very important for our fuLooking at the firm’s activity ture development. over the years, what would you say where the most important What were the changes in moments in its development? the local business environment What was the most difficult that impacted your businesses one? the most over the years? What There were few things to which about now? we have paid attention for the deThe business environment velopment of the law firm: the cre- changed a lot in the last 15 years. ation of a good team of profes- The major impact on our law firmsionals around us, the building of and I think over any other law firm the appropriate professional infra- acting in business law-was the nestructure and the construction of cessity to specialize. More and our good reputation as lawyers in more we had to extend the experia market growing and changing ence in other new fields of law –inconstantly. One difficult time was tellectual property, taxation, labor, 16
arbitration, banking, insurance, project financing, capital markets, maritime law, insolvency, environmental, commercial competition, consumer protection, and in various economical sectors-oil and gas, food, cosmetics, home appliances, infrastructure, pharmaceuticals, real estate, health, telecommunications, heavy industry, agricultural, education etc. Now, we have a very large area of expertise and we continue to specialize more and more. We have a strong intellectual property practice, a powerful commercial competition expertise, we deal with a lot of commercial law problems involving companies and shareholders in multinational or small-medium companies, we assist in international arbitration (including ICSID disputes), we conduct insolvency procedures, we manage major restitution of property disputes, we assist in important real estate or in energy law projects, we assist in financial deals with international financing institutions as clients of us and we provide a large range of international private law advise. A lawyer has to respond all the time to his clients’ needs, therefore we need to be always ready to add more and more to our existing practice.
What were the first practices you started with and how many did you add over the years? What other ones do you see as developing the most in the future? A true legal practice in a continental legal system like the Romanian one is based on a civil law practice. This was, remains and shall represent our basis for building any other type of legal experience which, without a strong civil law practice, is really impossible to be conceived. Apart from what we currently practice, as I mentioned before, we need to develop more our M&A expertise, and to act more in the insurance field which, in Romania, could develop in the coming years. Also, we may need to work more in the energy field as well as in consumer protection
procedures. Criminal law related to business is also a good option for a more extended practice. In other words, our business law profile includes a large number of areas of law; however, we need a continuous effort to consolidate this practice for the benefit of our clients.
What are some of the cases you have found most challenging to work on over the years (personally and for the firm)? Due to the confidentiality imposed by our profession, I may not disclose details of the cases which were challenging to work over. However, I may give as example a litigation involving a product liability matter where we assisted a major car producer; the litigation was conducted on the defendant side and the claim for damages was rejected after few years of dispute in front of the Romanian courts; or the assistance to major multinational oil and gas company –Shell, for establishing in Romania their GPL business which took almost 2 years and half of hard but interesting business law work; or few withholding tax disputes in front of the Court of Accounts which were successfully finalized; or acting for a multinational company in a discrimination dispute; or the assistance to an important business advisor in an arbitration conducted on a commercial contract conflict relying upon professional liability. It is impossible to make a top list. Every case in itself is challenging because the law in itself is challenging by its nature. What is the staffing structure of the firm? How do you manage the team of collaborating lawyers? We are currently almost 40 lawyers, of whom 10 are partners - I and Valeriu, as founding partners being included. The other lawyers are associates all being registered with the Bucharest Bar. The legal practice is divided in two major sectors-litigation and advisory work. We have also a supBUSINESS REVIEW / November 15 - 21, 2010
porting staff composed by secretaries, IT responsible, financial and accountant personnel. In all, we are 52 persons working in the offices of Opera Center. The lawyers are organized in groups, each group is conducted by a senior lawyer, and the two founding partners provide the coordination of the legal practice of these groups, by expertise. The coordination of the entire law firm is under the responsibility of my co-founding partner, Valeriu Stoica. In some projects or court cases, we join our expertise with other lawyers from Europe, United States or other jurisdictions. This represents a very efficient way to work for international clients and there is a mutual benefit for the lawyers in what their exchange of experience is concerned.
cultural or religious institutions. Starting 2007, STOICA & Asociatii decided to award personalities of the Romanian field of lawprofessors, attorneys etc. for their entire legal carrier; this year, when we celebrated 15 years since our establishment, we have awarded Mrs. Mihail Ionel Ghiga, a reputed Romanian practicing lawyer. Also, we have started to support financially the young artistic talents; this year, we have given this support to the young piano student Monica Nicoleta Gemene. We realize that we need to get even more involved in social responsibility activities and we have some plans to develop in the coming future with some schools and social institutions.
What are some of the hiring criteria for joining the Stoica & Asociatii team? A strong legal knowledge combined with a practical approach, respect and dedication to the clients’ needs, good knowledge of foreign languages and also respect of the moral values- these are the main criteria to join STOICA & Asociatii team, which is in light to our fundamental principles guiding us in our day to day work - fidelity, integrity, and fortitude (“Fidelitas, Integritas, Fortitudo”).We use to select our colleagues since they are students at the Faculty of Law, we work hard with them to train them for the legal practice and once registered in the Bar, they are given the opportunity of proving their skills as lawyers; with the time, they have also the chance to be promoted inside our institution.
How would you characterize the law firm you’re running in comparison when benchmarking with other law firms active in Romania? What are the main attributes a client can expect from being counseled at Stoica & Asociatii? Our conduct as practicing lawyers is based on high professional standards and also on an ethical behavior towards our clients. We shall continue be guided by our principles-Fidelitas, Integritas, Fortitudo. We want that clients trust us-this is very important. This trust implies also keeping our good reputation constantly at the same level and even to get it grow. We put our clients’ interests before anything else and we fight for them with continuous dedication. We build our experience and expertise together with our clients and in the benefit of our clients.
What type of community activities does the firm get involved in? Are you planning to expand that in the future? We are members of Union Internationale des Avocats, the oldest lawyers association in the world and I am working very close with the Insurance and the Company Law commissions of this association. We are also members of another worldwide association-World Link for Law, acting as exclusive member for Romania. In Romania, we are members in some of the major chambers-British, American, German; we are also providing pro bono assistance to some
How do you see the development of the firm on the short and medium term? Are there specific areas or industries you want to focus on? We enjoy of a strong litigation department and we intent to keep this and even to consolidate such expertise. Also, we intend to develop more the advisory work, oriented towards new areas of expertise. We do not intend to get to spectacular growing or to merge with or take over other law firms. Simply, to remain as we are: a strong team of lawyers, preoccupied to get a continuous growth based on solid accumulation.
BUSINESS REVIEW / November 15 - 21, 2010
Company Profile: STOICA & Asociatii l Founded in November 1995, by the association of
two pre-eminent Romanian lawyers, Professor Valeriu Stoica (Ph.D.) and Cristiana I. Stoica (Ph.D.) l The experience achieved by the two founding partners in both civil and commercial disputes, as well as in international business law helped the team of STOICA & Asociatii to grow steadily to its current size of almost 40 lawyers, of which eight are partners and the others are associates and assistants, with a total staff of more than 50 l The co-partners of the firm -Catalina Dicu, Marieta Avram, Dan R. Raducanu, Radu Rizoiu, Razvan Dinca, Doru Traila, Anca L. Caraiola and Laura E. Radu- are highly appreciated lawyers acting in almost all areas of law practice. l The firm’s early assignments included pilot privatisation projects, foreign investments, and providing permanent legal assistance to a large number of companies for their day-to-day operating activities. STOICA & Asociatii assisted international project financing, capital market transactions, M&A and international contracts. l Specific assistance was given in connection with power, oil and gas projects, as well as in IT, media and telecoms transactions. l With more than 15 years of experience, STOICA & Asociatii constantly extended their legal expertise in the following sectors: corporate and commercial, banking, financial and capital markets, real estate, dispute resolution, foreign investments and privatisation, project financing, intellectual property and copyright, competition and taxation, labour and employment, IT, telecoms and media, power, energy and natural resources, maritime and transport. l Clients represented by STOICA & Asociatii include multinational entities, international financial institutions, commercial banks, investments funds, media, energy and commercial entities, domestic and foreign small and medium companies, as well as governmental agencies, central and local authorities or private individuals from Romania and abroad.
Contact: OPERA CENTER II STR. DR. N. STAICOVICI NR. 2, ETAJ 2 SECTOR 5, 050558 BUCURESTI Telephone: +40 21 402 0930 Fax: +40 21 402 0931 E-mail: sca@stoica-asociatii.ro Website: www.stoica-asociatii.ro Contact: Ms. Cristiana I. Stoica, Founding Partner
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BALANCE
COURTESY OF SOCIETE GOURMET
Cookery classes cater to new appetite for gastronomy Romanian cuisine has yet to taste much international acclaim and most natives’ palates are not what connoisseurs would call sophisticated. Nevertheless, Romanians savor their status as huge food enthusiasts, with the proof of the pudding in the smorgasbord of cookery classes available in Bucharest. If you are looking to extend your culinary skills, feast your eyes on the following. Simona Bazavan
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wine pairing, with our guests learning professional high-level cooking tips and tricks from Chef Wendorf,” says Ichim. The typical customer is generally aged between 30 and 50, has travelled a lot, already has a background in the field and is eager to learn more. “We have many expat guests and the majority of our customers have had at least one Michelin restaurant experience,” says the owner. And although now is not exactly an auspicious time to start a new business, Ichim says that this niche market has potential, with Romanians being very open to the concept. “60 percent of our clients have
COURTESY OF SOCIETE GOURMET
Whether we are talking about haute cuisine aficionados or more down to earth food fans, taking cookery classes is turning into a fashionable hobby for cosmopolitan Bucharesters and the local range of such services is definitely on the rise. “I know of cookery classes in Paris, Tuscany and London. Actually cookery classes are offered all over the world. I went to a chocolate workshop in London, loved it and ever since have imagined myself spending a lifetime traveling to charming places and learning about
fine food and wines,” Raluca Ichim told Business Review, recalling the beginning of Société Gourmet. She set up the business last year with German chef Daniel Wendorf. It was the first in Bucharest to offer cookery classes, including private lessons, private chef services and “team cooking” workshops for companies, says the owner. “What we offer is a complete experience. It gets one inside the ‘secret’ world of high quality cuisine, good wines and bien vivre,” she adds. “Our cooking style is international and classes are a mix of serious cooking, professional information, a lot of fun, great food and
heard about cookery classes from abroad, approximately 20 percent have already been to cookery classes in France or Italy and the rest of our guests find this experience completely new and amazing,” says the businesswoman. The most popular classes that Société Gourmet offers are corporate team cookery classes and private lessons. “We go to the customer’s home and organize a cooking class for their friends and family,” Ichim explains. Cooking experiences at Société Gourmet are priced between EUR 60 and EUR 120. A normal cookery class that teaches a three-course menu and wine pairing is between EUR 59 and EUR 67 per person with water, coffee and recipe booklets included. Prices for team cookery classes vary according to the number of participants, menu chosen and number of workshops. The initial investment in the business is approximately EUR 25,000 so far. “At the moment the investment hasn’t been recovered but we have high hopes that 2011 will bring a positive outcome,” concludes Ichim. Another option for haute gourmet food aficionados is the five-star Carol Parc Hotel. Its Haute Gourmet Cooking Lessons are organized in the hotel’s Poem restaurant and include classes such as Cooking with Champagne, Men in the Kitchen, I’m on a Diet!, Sushi with Joy and Sauces of the World. Another two will be added starting November 20 and December 4, Journey to the Middle East and CakesMini Cakes. For RON 200 students learn to cook three courses and at the end get to eat their own creations in the hotel’s restaurant. Cookery classes appeal particularly to people interested in what they eat and how their food is being prepared. And their number is growing, Violeta Dinca, owner of Violeta’s Vintage Kitchen, a local bistro that also offers cooking workshops, told Business Review.
Société Gourmet students get busy in the kitchen BUSINESS REVIEW / November 15 - 21, 2010
BALANCE
OPINION
SO YOU THINK YOU CAN COOK? COURTESY OF CAROL PARC HOTEL
Step up to the plate: a lesson at Carol Parc Hotel
“Cooking is therapeutic. It gives us back our normality, the safety and warmth we need in these bizarre times we live in,” Dinca says. The big picture is that people are becoming more and more concerned about the quality of their food, the slowfood movement is gaining ground and fairs for local traditional suppliers are becoming a common scene in Bucharest at the weekend. “And this is great!” Dinca reckons. “People are rediscovering the pleasure of watching, picking, shopping, cooking and eating real food, the kind made from fresh and natural ingredients.” Violetas’s Vintage Kitchen offers bread and sweet-baking workshops both for adults and children and as of this spring the owner plans to include soup workshops. The price of a workshop is RON 100. If you are a sushi fan, the Bucharest Japanese Language School also offers sushi classes for RON 45 a session. The school organizes Makisushi and Nigirisushi classes that require two sessions each.
BUSINESS REVIEW / November 15 - 21, 2010
Let me assure you of one thing. There is no shame in taking cookery classes, unless you are in Romania where attending a cooking class is considered to be emasculating for a man, and even worse for a woman! To put it another way, all over the civilized world, being a top chef is considered a glamorous and sexy job. But yet again Romania bucks the trend, and being a chef in this gastronomic desert is considered by the ignorant population as being on the same level as that of a construction site worker. How little Romanians know about the real world. They have no idea that in Europe and the Americas, top chefs are treated like rock stars. These chefs have fan clubs and groupies and television camera crews chasing them down the street, and paparazzi sneaking intimate photographs of them. And above all, they earn millions and millions. Yes, my friends, chefs are the media darlings that outlive sportsmen, musicians and movie stars! So do you want to join them? If so, read on! Put your pride aside and recognize that every top chef went to cookery classes in chef schools around the world. Whatever you know, you will be shocked when you are tutored by a competent commercial chef. For example, when I went to chef school the first thing they taught me was how to hold a knife. Then they taught me how to respect my knife, to love it and to look after it. Then we were trained in the art of simply chopping vegetables, and eccentrically carving vegetable sculptures. At the end of a training course, you are taught how to use your knife to butcher meat. If you think this is easy, whoooah there – it is not! A good chef school will teach you how to balance flavors whilst maintaining the texture of the dish. This word “texture” is hugely important because it means NOTHING in Romanian cooking. This is a country which simply burns food in unhealthy oil and throws it at the table. There are methods of tenderizing food which are unknown in this country. So let’s look at how to learn to cook in Bucharest. GO ONLY TO a school which has a European chef. If you go to a Romanian chef, he will simply teach you to perpetuate the worst food in the Western world. Yes, that means Romanian food. It is not “cuisine”, it is just anything served hot. Sarmale, mamaliguta, mici... it doesn’t matter. In the beautiful world of sophisticated international cuisine Romanian food is nothing more than a principle of eating to stay alive. There is no beauty, no skill and no talent in cooking this crude, peasant stuff. But millions of Romanians still love it, and who am I to say they are wrong? TELEVISION CHEFS can teach you a lot. But there are fraudsters on the screen. My golden rule would be to watch only Western chefs, which you see locally on television with Romanian translations. There are so many fabulous cooking programs. But there is one program to be avoided at all costs and that is the ghastly Martha Stewart’s. This fraudster, who recently came out of prison, had conned Americans into making her a television icon of all things society. To the trailer trash American public, she was idolized by telling them how to arrange a bowl of flowers or how to set the dishes on a table. After casting off her orange prison jumpsuit, this chancer has re-invented herself as a chef. If you see her on television, switch off. You will learn nothing. ROMANIAN TELEVISION CHEFS. Oh, this makes me laugh. But I do applaud Romanian television for broadcasting so many international foodie programs. If a new generation of Romanians can tear themselves away from peasant food by watching these programs, the country will be the richer for it. Michael Barclay Mab.media@dnt.ro
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BR EVENTS
BR exposes tax risks at Fiscal Litigations event Financial and legal specialists discussed the main tax management issues during the Business Review Fiscal Litigations event on November 4. Conspicuous by their absence were the authorities from the National Fiscal Administration Agency (ANAF). Dan Dascalu, partner at D&B David & Baias, observed that they have not made any recent public appearances at such events. 1
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■ 1. Ioana Sandru, partner at ZRP Tax ■ 2. Florin Gherghel, head of the tax & finance depart-
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ment at Noerr Finance & Tax ■ 3. Daniel Anghel, partner, indirect tax, at PwC Romania ■ 4. Dan Dascalu, partner at D&B David & Baias ■ 5. Mircea Marinescu, chief financial officer at
ALL PHOTOS: LAURENTIU OBAE
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Romstal ■ 6. Financial and legal specialists shared a 360-degree approach to potential tax issues and offered solutions to the problems raised by the audience ■ 7.With the participation of the audience, an almost hour-long Q&A session was held ■ 8 & 9. The discussions continued on a more informal basis after the event
BUSINESS REVIEW / November 15 - 21, 2010
BR EVENTS 10
LAURENTIU OBAE
■ 10. The event, organized in the Legal Business Series, came in response to the authorities’ intensification of tax audits
Corina Dumitrescu Around 60 participants came to share their personal experience of contentious administrative issues during an almost hour-long Q&A session, after the speakers outlined their 360-degree approach to potential tax issues. During the event sessions, Ioana Sandru, partner at ZRP Tax, explained the application of EU law in tax litigation, highlighting the role of the European Court of Justice in fiscal inspections and litigation. Sandru also raised practical cases in which an EU Treaty breach may be invoked, such as the non-deductibility of contractual penalties in financial contracts signed with non-resident partners before January 1 2010. The partner urged that when confronted with fiscal issues, a company should call on the support of a mixed team of consultants, with both fiscal and legal backgrounds. Areas of risk for taxpayers and the general approach of the tax authorities along with sensitive fields (such as tax avoidance and its measures and consequences) were tackled by Dascalu and Daniel Anghel, partner, indirect tax, at PwC Romania. Among the most notable risk areas for contributors are, Anghel said, the intensification of tax inspections (up 26 percent), delayed VAT returns (rising 50 percent), while tax returns to non-residents are an unresolved issue, as the authorities do not process such requests directly. Anghel explained the difficulties in fiscal litigation, such as the BUSINESS REVIEW / November 15 - 21, 2010
court’s problems in interpreting both national and international legislation and the fiscal administration’s so-called “silence” or lack of response concerning some issues. The most recent modifications to tax procedures were also discussed. Mircea Marinescu, chief financial officer at Romstal, gave the client perspective on fiscal litigation. He explained the necessary measures throughout all the stages of a fiscal audit, from its preparation and process per se to its contestation by judicial and administrative means. Marinescu also highlighted the importance of anticipating an audit, as it is best to prepare for such a demanding process in advance, rather than be taken by surprise by it. Practical aspects regarding the stages of tax inspections, insight into court practices during tax litigation and practical issues concerning the contestation and suspension of the enforced collection of tax liabilities were all touched on by Florin Gherghel, head of the tax & finance department at Noerr Finance & Tax. Gherghel also spoke on the more technical aspects of tax assessment, such as the postponement and suspension of a tax inspection. He recommended discussions with the inspecting team, from whom, few people know, assistance may be called upon and feedback sought throughout the inspection. The potential contestation of the administrative documents was also aired, with special focus put on the terms of starting such procedures – 30 days for administrative fiscal documents and 15 days for minutes stating contraventions. 21
FILM REVIEW / CITY
FILMREVIEW: Inception
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Debbie Stowe Director: Christopher Nolan Starring: Leonardo DiCaprio, Ken Watanabe, Joseph GordonLevitt, Marion Cotillard, Ellen Page, Cillian Murphy On at: Hollywood Multiplex
Draghici, enthused by his jazz project
Pan flutist Damian Draghici has announced that he is working on a jazz album, to be released in 2011 in the US (and a little later in Romania), hopefully
by March next year. It will feature exclusively jazz songs (or bebop, to be more precise), the artist said at a press conference last week, and marks his full-time switch to the genre and an end to his involvement with pop music. Draghici’s concert held on November 12 at Sala Palatului has marked his return to Romania after one year in the United States, where he began his jazz project, on which he collaborated with Michel Camilo, Stanley Clarke, Bob Mintzer, Russell Ferrante, Vinnie Colaiuta, Dave Weckl and Luciana Souza. The pan flutist added that he has renounced his pop past and will dedicate himself fully to jazz from now on. Corina Dumitrescu
Roxette join the Joyride to Bucharest in 2011 Swedish band Roxette have included Romania in their 2011 tour, marking a new album release after an almost eight-year-long career hiatus. This will be the duo’s first visit to Romania in their 25-year history, which has seen the group sell 75 million albums worldwide and enjoy over 30 hits. Marie Fredriksson and Per Gessle took an eight-year break due to Fredriksson’s health problems which began in 2002, from which the singer has now successfully recovered. The concert will take place in Bucharest, at Zone Arena, on May 30. Tickets will be available for purchase from November 16, on myticket.ro, from Diverta shops, the Muzica
New York Times sings praises of ‘intriguing and exhilarating’ Bucharest The NY Times travel section has included an article on Bucharest as a noteworthy destination “for a long weekend”, that has not yet been “subjected to the centrifuge of globalization” and seems to be the right location for an “urban adventure”. The writer notes, “The liveliest part of the city is the Lipscani district, or Old Town, right in the heart of the city”. The article, published in the NY Times on November 8, concludes, “Bucharest is one of the last major European cities that hasn’t been pasteurized by gentrification or lost its soul to mass tourism”, and is an “intriguing city”, with an “exhilarating strangeness”. Read the full article at http://tmagazine.blogs.nytimes.com. Corina Dumitrescu
COURTESY OF EMAGIC
In the future, we’re all going to be asleep with wires strapped to our heads, while our better dressed alter-egos whoop it up in virtual reality. The latest of a series of films to posit this is Inception, the big-budget sci-fi summer release that’s as much brain baffler as blockbuster. Albert Einstein and Stephen Hawking working in tandem would have trouble figuring out what’s going on in this fiendish film. The perplexing plot centers on hot shot dream raider Dom Cobb (Leonardo DiCaprio). Dom is the best in the business, entering the minds of company bosses to steal corporate secrets for their rivals. But all he really wants is to be reunited with his young children back in the United States, where he stands falsely accused of murder. Exiled from them in Paris, the children haunt his subconscious along with his former wife, sabotaging his professional endeavors. But Dom is tempted back for One Last Job by a powerful Japanese businessman who will make the murder rap disappear if Dom can pull off the challenge of planting rather than stealing an idea, persuading a corporate rival to break up his business empire. Are you following? So Dom puts together a crack team of specialists for the mission – like Ocean’s 11 but without the gags – which has to burrow down into three layers of dreams and plant the idea while being shot at by the henchmen generated by the target’s subconscious. Simple. Enormous sums of cash have been lavished on Inception, and it shows. A Paris street bends to create a weird urban box, illustrating the malleable architecture of dreamscapes, while one level of the business rival’s subconscious is a swanky hotel that is flipped around during a fight scene. The production values cannot be faulted – leaving aside a rather lame sequence made
COURTESY OF BRIGHT LIGHT
In your dreams: Leo & co invade the subconscious
up of a pastiche James Bond mountainside and villain’s lair, replete with ski slope chases. Director and writer Christopher Nolan is also to be praised for crediting his audience with some intelligence, his tricksy plot being one of the most demanding and intricate narratives to emerge from Hollywood in a long time. But for its undeniable ambition, ingeniousness, technical virtuosity and visual brio, Inception lacks substance. First, the house-of-cards plot, when examined, doesn’t really stand up. Even if you accept that a Japanese businessman can make murder charges in the US go away with one phone call, why would Dom risk the lives of six people just to be able to return to the United States? Why wouldn’t he simply have someone bring his children to Paris? It also feels like we’ve seen much of it before. Virtual reality while you sleep – The Matrix. Specialists tinkering with each other’s minds – Push. And though it’s a very different picture, rummaging around in someone’s subconscious was done to much more imaginative effect in Being John Malkovich. All the sound and fury leaves no time for character exploration, making Dom and co rather one-dimensional. This would be fine if the movie had been positioned simply as a superior action flick. But Inception seems to conceive of itself as something much grander. The absence of any moral message, philosophical musing or consequences (is it okay to invade people’s subconscious for corporate espionage? Does all that dream-meddling and idea-planting change the person? The film is not interested in any of this) leaves the movie feeling somewhat empty, though the dazzling aesthetics and structure may successfully blind viewers to this while it is in progress. A little more meaning could have ensured that Inception left something cerebral behind after the thrill wears off.
Damian Draghici working on jazz album, ditches pop
It must have been love: the Swedish duo are long awaited in Bucharest
store and Mihai Eminescu bookshop. Corina Dumitrescu
RnB and soul singer Melanie Fiona comes to town Canadian RnB, pop, soul and hiphop singer, Melanie Fiona, will hold a concert in Bucharest on December 2. Fiona, known to Romanian audiences for her hit “Give It to Me Right”, among others, graduated from financial college and is of Guyanese, Indian and Portuguese origins. Fiona cites Bob Marley, Sade and Patsy Cline as influences, while her most recent album was inspired by classic soul artists, such as Sam Cooke, Nat King Cole and Gladys Knight, as well as more modern music. The artist’s Bucharest concert will be held at Club Fratelli, on Str. Glodeni. Tickets, which cost RON 200, can be purchased online on eventim.ro. Corina Dumitrescu BUSINESS REVIEW / November 15 - 21, 2010