Business Review No. 47, December 20 - 26

3Q: With cloud computing the next big thing, Radu Popescu Zeletin, founder of the eCAESAR R&D Institute in Bucharest, gets BR up-todate about his firm’s project in this innovative domain and gives his verdict on Romania’s progress towards e-government »page 5

ROMANIA’S PREMIERE BUSINESS WEEKLY

YEAR IN REVIEW AS MOST FIRMS HOPE 2011 WILL BE A HAPPIER NEW YEAR, BR LOOKS BACK ON THE STORY OF 2010 AND HOW BUSINESS COPED WITH THE ECONOMIC STORM »PAGES 14-19

DECEMBER 20 - 26, 2010 / VOLUME 14, NUMBER 47

NEWS

HOLIDAY GIFT IDEAS

Local internet acess triples Three times more Romanians now surf the net than in 2006 » page 5

GE Capital sells JV stake to Garanti GE Capital has sold its 26.7 percent stake in the joint venture to Garanti Bank, which now owns GE Money financial entities » page 7

The weather outside might be frightful but the gifts are certainly delightful in BR’s review of the presents for your nearest and dearest BR is b ack wit this festive season h the firs t i s s o u f 2011 » pages 10 -13 on Jan e

uary 1 In the m 7. e a n t ime, be sure www.bu to check out sinessr for upd eview.ro ates

TALENT

Going places Mihaela Dragomir, GM of Ella Traveland, plans to take her company into the medical events sector » page 8 INTERVIEW

Paving the way

Photo: Dreamstime

Emil Gola, GM of Elis Pavaje, tells BR about his firm’s plans for international expansion » page 9 PLUS Young musicians are playing to support Romania’s churches » page 20 To see or not to see? BR gives its verdict on Tron: Legacy » page 21

www.business-review.ro Business Review | December 20-26, 2010

NEWS 3

NEWS in brief IMAGE of the week

Photo: Laurentiu Obae

RETAIL Fourth Metro Punct outlet opens in Targoviste Metro Cash & Carry Romania has opened its fourth Metro Punct outlet in Targoviste. The retailer established its first such store this May in Satu Mare as a new concept on the local market, exclusively targeting resellers. Proximity and ease of shopping are the advantages of the new concept, the retailer says.

The 1,850-sqm store has 3,000 products in its portfolio. Items on sale also include Metro’s own-brand labels, Aro, Fine Food and Sigma. The firm’s local network now includes 25 outlets.

Billa opens third supermarket in Galati, reaches 56 units in Romania Billa has opened its third supermarket in Galati, taking the retailer to a total of 56 units in Romania. The new supermarket is located inside the Continental compound and has a sales surface of 550 sqm that will host approximately 6,000 items.

Billa is part of Austrian-based Rewe International AG, which has 65,692 employees in total.

COMPANIES ArcelorMittal restarts unit in Galati ahead of schedule ArcelorMittal Galati has announced that its third blast furnace will be restarted at

WEEK in numbers

24 million euro – the fine the Competition Council gave the Romanian Post for breaching competition rules

940 euro – the average monthly salary in the Czech Republic, according to Unicredit research. Poles earn just over EUR 900. Romanians make do with EUR 332, just ahead of Bulgarians on EUR 320

1.4 % Ernst & Young’s projected Eurozone economic growth for 2011

the beginning of January next year, two weeks earlier than scheduled. The unit was shut down last month, since when the Galati unit has functioned with one furnace. The decision was made in response to harsh market conditions in the region, especially in Turkey. The firm has also announced also that its fifth blast furnace is scheduled to be restarted this summer, after relining and modernization are completed. ArcelorMittal operates locally units in Galati and Hunedoara, two pipe producers in Iasi and Roman and Romportmet Galati.

Halewood Romania expands local business Halewood Romania has expanded its local business by creating a new company dedicated to wine imports. Halewood International Premium Imports will import and distribute wine brands, including bottles from the brand portfolio of mother company Halewood International Ltd, as well as beer, spirits and alcoholic premixes. The new firm, which will begin activity in January, will be led by managing director Cornel Bocse. “Setting up a new company under the Halewood Group umbrella was a strategic decision to take advantage of the existing market opportunities,” said Bocse.

Panasonic opens new store in Focsani Panasonic has inaugurated a new concept store in Focsani, which it expects to generate sales of approximately EUR 500,000 over the next year.

Statues take center stage in front of Bucharest National Theater After a statue of Romania’s King Carol I was unveiled at the beginning of December, another has been officially uncovered in front of the National Theater. It represents a group of characters created by playwright Ioan Luca Caragiale, a seminal figure in Romanian literature, whose work touched on local politics during the emergence of modern Romania, towards the end of the 19th century. The statues, which are 4 meters tall, stand atop a carttype platform. Designed by sculptor Ioan Bolborea, the tableau, which cost EUR 1 million, was paid for by the Bucharest City Hall and the Culture Ministry.

The investment in the shop totaled EUR 50,000. After this opening, the consumer electronics firm is looking into opening a new concept store in ClujNapoca. The stores aim to increase interaction between consumers and the company’s products and to familiarize shoppers with the latest technologies, especially 3D technology. This is the second concept store that the company has opened following one in Unirea Shopping Center in Bucharest. These outlets’ design is inspired by Japanese culture.

EU & EU FUNDING EBRD grants EUR 10 million loan to Patria Credit The EBRD has granted a EUR 10 million loan equivalent to Patria Credit IFN for on-lending to micro and small enterprises (MSEs). Out of the total sum, EUR 3 million will be given in Romanian RON, reflecting the EBRD’s focus on increasing local currency lending in its countries of operations.

The loan comes under the EU Romania Microcredit Facility and is co-financed by the EU and the Romanian government. It will support Patria Credit in expanding its lending portfolio and will increase the availability of finance to MSEs. Patria Credit is a non-banking financial institution, controlled by the Romanian American Enterprise Fund and the Balkan Accession Fund, which pro-

www.business-review.ro Business Review | December 20-26, 2010

4 NEWS

NEWS in brief vides lending to micro and small entrepreneurs and to agricultural producers.

By the end of 2010 it will reach total assets of over EUR 40 million and a network of 39 branches.

EC directs EUR 81 million to boost local film production The European Commission has approved an EUR 80.68 million scheme to support movie-making in Romania, the development of the local cinema industry and cinematography education.

The scheme consists of a series of interest-free loans and non-refundable grants to produce Romanian films, or movies made with Romanian participation. Within the program, producers are allowed to spend up to 20 percent of the film’s budget with the European Economic Space SEE, not just in Romania.

The local authorities plan to run the scheme until the end of 2014.

Romanian GDP per capita less than half EU average in 2009 Gross Domestic Product (GDP) per capita in Romania, expressed in purchasing power standards (PPS), reached only 46 percent of the EU average last year, putting the country second to last among member states, according to data released last week by Eurostat. Romania registered a 1 percent decrease against the year before, when the figure was 47 percent of the average.

Top of the list is Luxembourg with a GDP per capita of more than two and a half times the EU27 average, while the Netherlands recorded over 30 percent above the midpoint. Bulgaria came bottom with 44 percent, the same as in 2008.

Business confidence continues slow recovery in EU Business confidence is recovering from its low level in 2010, and the balance for 2011 is positive again, Eurochambres’ annual Economic Survey for 2011 reveals.

Overall, more than 30 percent of European companies think that next year’s business climate will improve, while over half of the respondents believe that it will remain unchanged.Data for Romania are balanced. While 36.4 percent of local companies predict that the business climate will improve in 2011, 31.2 percent say that it will remain unchanged and 32.4 percent expect it to worsen.

Sweden, Belgium and Estonia enjoy the highest levels of business confidence. The three most pessimistic countries are Greece, Croatia and Spain. Greek business sentiment is the worst among

the surveyed countries with two thirds of companies expecting a further decline in corporate development in 2011.

The EU average is 33.7 percent (improve), 47.2 percent (remain unchanged) and 19.1 percent (worsen). The survey results are based on over 70,000 responses from across Europe.

EMPLOYMENT Three times more Romanians working abroad The number of Romanians employed abroad on a work contract has increased threefold this year compared to 2009, as more and more local workers seek higher salaries, according to recruitment company Thera Group.

“The economic recession has driven many Romanians to opt for a job abroad, which offers better working conditions and better salaries than what they could expect in the country,” said Cristian Tudorache, general manager of the recruitment firm.

The company’s most popular recruitment programs were work&travel for Spain and Greece, where the jobs offered were in the hotel industry or agriculture. Many applicants chose Nordic destinations such as Norway, Sweden and Denmark. The most sought after positions were those of professional drivers and oil and construction specialists.

LEGAL PeliFilip assists BelRom and K&S Developments over Electroputere Shopping Center Law firm PeliFilip has advised Belgian companies BelRom Real Estate and K&S Developments in negotiating and signing the contracts for the development of the Electroputere Shopping Center in Craiova.

The assistance involved consulting for the acquisition of products, financing for the acquisition of goods, fiscal aspects, the sale of future goods, building and other related contracts, and lasted five months. The team that worked on the project was coordinated by partners Francisc Peli and Carmen Peli, and included Ioana Ene, Oana Badarau, Alexandra Manciulea and Mirona Apostu as collaborating lawyers.

Bostina&Asociatii to advise on Oradea airport modernization Law firm Bostina&Asociatii in consortium with Deloitte Consulting has signed a contract to provide legal and financial advisory services to develop a study on the modernization of Oradea airport. According to the contract, Deloitte Consulting will focus on financial and business details and Bostina&Asociatii on legal issues.

Bostina&Asociatii is involved in a number of major infrastructure improvements in Romania, including the modernization of Bacau airport, plus upgrading the Bucharest- Constanta railway, the Bucharest-Constanta highway and the Basarab passage in Bucharest.

www.business-review.ro Business Review | December 20 - 26, 2010

NEWS 5

RETAIL

real,- officials dismiss takeover rumors as speculation

R

Get real: the firm dismisses the rumors ket Romania is simple market speculation and needs to be treated as such,” said

Michel Lamoot CEO of real,- Hypermarket Romania Tesco is the largest British retailer, with sales of GBP 62 million. The firm has recruited Andreea Lupea, 35, who served as operations manager of the real,- network in Romania until April this year, when she announced she would leave the position to focus on personal projects. She has also worked for Metro Cash & Carry Romania, where she was promoted to regional network manager in 2003.

Tesco officials have also denied the rumors that the retailer is considering an acquisition on the local market.

Hypermarket operators currently active on the local market are international groups such as Metro, Cora, Auchan and Kaufland, which have reached cumulated sales of around EUR 3 billion, a 10 percent decrease compared to the previous year. ∫ Otilia Haraga

INTERNET

TECHNOLOGY

Local internet access triples since 2006

Kingston posts USD 10.5 mln turnover in Romania

I

STOCKEXCHANGE

nternet access in Romania has increased threefold since 2006, according to Eurostat data, while the share of European households with broadband connections has doubled to 61 percent in the same period.

Online access has increased in all the countries covered. The survey found that Sweden had the highest uptake of broadband connections in 2010, at 83 percent, while Greece had the lowest, at 41 percent.

Eurostat surveyed individuals and households in the 27 EU member states, as well as Norway, Croatia and Turkey.

Young people between 16 and 24 are more likely to use social media, found researchers. Four fifths of younger users posted messages on chat sites, blogs and social networks compared to less than 20 percent of those aged 55 to 74. Almost all users, regardless of age, sent emails during the first quarter of 2010.∫ Otilia Haraga

Get yourself connected: online is in

POLITICS

PSD suspends Senate president Geoana for six months

T

he president of the Senate, Mircea Geoana, has been suspended from the Social Democrat Party (PSD) for six months, after making allegations on his personal blog that Victor Ponta, now president of the PSD, advised him to lie during a televised presidential debate when he was running Geoana’s campaign.

The majority decision was made by

the National Permanent Bureau. Sixteen members voted in favor while six voted against the measure.

Ponta said that Geoana had received a warning, but did not comment further.

Geoana ran for the PSD against incumbent Traian Basescu in the last presidential elections.

Otilia Haraga

Kingston Technology Inc. posted a turnover of USD 10.5 million in Romania this year, a 13 percent growth compared to last year, when the total value of the company’s sales was USD 9.3 million.

“After five years of presence in Romania, we’re seeing the major potential of this market, on which we’re focusing our attention, as well as Poland and the Czech Republic,” said Pawel Smigielski, regional manager for Eastern Europe.

The higher turnover was due to growth in the DRAM segment, which was 13 percent higher than last year, reaching a total of USD 5.6 million and representing 53 percent of the company’s revenues. At the same time, the Flash segment posted 11 percent higher sales, reaching USD 4.9 million.

“The choice of higher memory units as well as the soaring of the DDR3 technology compared to DDR2 are the main factors behind the development of the business,” said Gabriel Gidea, development manager at Kingston Technology Romania, Bulgaria and Moldova.

The firm aims to register a 20 percent growth on the Flash segment and 15 percent on the DRAM side next year. Company officials expect the HyperX sector to represent 20 percent of the total value of the ValueRAM business unit next year.

“Next year will be under the sign of SSD technology, an area where we expect to have 100 percent growth due to the advantages that this technology can offer SMEs that wish to optimize their expenses and grow their performance at the same time,” said Gabriel Gidea. ∫ Otilia Haraga

Photo: Laurentiu Obae

Photo: Laurentiu Obae

epresentatives of retailer real,- , part of Metro Group, have dismissed reports that the firm is in talks to sell its Romanian stores to UK retail giant Tesco.

“There is no plan to give up the real,sales division on the Romanian market.

Moreover, Metro Group trusts the development of the real,- sales line on a promising market with potential. In the future we will continue to strengthen our position on the Romanian hypermarket sector,” said Joel Saveuse, member of the administration board of MetroAG. The statement comes in response to media reports that British retailer Tesco is negotiating a takeover of real,- hypermarkets in a bid to penetrate the Romanian market.“We are looking at all the opportunities on the market to grow our business, either through constant expansion or through acquisitions. Any suggestion of a potential takeover of real-, Hypermar-

3Q Radu Popescu Zeletin

founder of eCAESAR R&D Institute in Bucharest, founded by Fraunhofer FOKUS Institute in Berlin Why did Fraunhofer FOKUS Institute establish eCAESAR in Romania?

One of Fraunhofer’s main focus points is ICT for the public sector. Since we are an R&D institute, we needed to find an environment in which our technologies could be put in place, and in Romania two-three years ago it was necessary to look into the future. A lot of companies we work with, such as IBM, Siemens and Microsoft, have projects in the public sector in Germany and offices in Romania. Our role in Germany is to be a neutral technological entity for the government, and we thought this could also be the role of eCAESAR in Romania – advising the government and municipalities.

What projects do you have under development at eCAESAR? As cloud-computing becomes big in all European countries, major companies are starting to deploy infrastructure on this platform. One of the big questions is: should a company trust putting data in the cloud? So we developed eSafe, an idea born in our institute but the project was done with eCAESAR. We have developed it for Microsoft Azure and Amazon and we are trying to develop it for IBM as well. We also have a project called PRO. In countries like Germany and Romania, a big problem is that companies need to supply data to various ministries and agencies about their activity. The idea is to come up with a system that automatically provides these data to the state agencies directly from the company’s ICT. The target is SMEs. How well is Romania doing in e-government implementation?

A project like e-Romania is very good. I think there is a will to go in this direction and to coordinate. After two years with eCAESAR in Romania, I can say progress is slow, probably because you don’t have an e-government CEO. What we learned in Germany and Austria is that if you take e-government seriously, you need a CEO for the whole of Romania, one person who has the power to go between the ministries and provide a coherent view of what needs to be done.

You need a master plan. There is a lot of talent in Romania.

Education is still one of the bigger assets you have here. otilia.haraga@business-review.ro

www.business-review.ro Business Review | December 20 - 26, 2010

6 NEWS CURRENCY

CONSTRUCTION

Drees & Sommer anticipates EUR 2 mln turnover in 2010

Eurozone may see double dip recession, E&Y

A

C

STOCKEXCHANGE

Euro-moan: recession may return fund from cash reserves and which produce immediate productivity gains,” say Ernst & Young representatives.

According to the report the ongoing financial crisis has exposed the growing divergence in economic performance between the northern and southern Eurozone countries.

The gap is expected to continue over the coming years. ∫ Simona Bazavan

onstruction project management company Drees & Sommer Romania estimates a turnover of approximately EUR 2 million in 2010, similar to the figure posted in 2009. “2011 will be a difficult year and we don’t foresee any growth. Our target is to maintain the current turnover next year too,” said Anton Stroe, technical director at Drees & Sommer Romania.

For the past two years OMV Petrom has been among the company’s most important clients, generating about EUR 500,000 of its overall turnover in 2009 and 2010.

The partnership started in 2006 and over the years has covered project management services for the demolition and repair of Petrom gas stations and warehouses.

In 2011 the company plans to focus on facility management and infrastructure consulting and estimates that about EUR 300,000 will be generated by the continuation of its partnership with OMV Petrom.

Another direction that Drees & Sommer Romania plans to tackle on the medium and long run is green building consultancy and related certification.

“We’re seeing demand for such services but the market is still in its beginning.

Only in about three to five years will we be able to talk about a local market for green buildings,” said Marc Porath, managing director of the company’s local branch.

Drees & Sommer has been present in Romania since 2005.

Founded in 1970 in Germany the firm now manages projects worth EUR 6.6 billion a year. ∫ Simona Bazavan

Courtesy of Dress&Sommer

fter strong expansion in the first three quarters of 2010, mainly due to exports, the Eurozone economy is showing signs of slowing down, according to the Eurozone Forecast, put together by Ernst & Young. The pessimistic report predicts 1.4 percent economic growth for 2011 and warns of the risk of a new recession.

“In our worst-case scenario, the Eurozone could fall into another period of recession, especially if the present crisis were to lead to a sovereign default. But even if this worst-case scenario does not materialize, the recovery we are entering is far from normal,” reads the report underlying the fact that the companies rather than government officials will be mainly responsible for generating private sector investment.

As the Eurozone’s political leadership is currently facing challenges, the political decisions taken in the next few weeks regarding Ireland, Portugal and Spain are expected to “have a much larger influence on the Eurozone economy in 2011 than any other foreseeable global and technological developments”.

Ernst & Young forecasts a 1.1 percent drop in Eurozone investment in 2010 after the previous year’s fall of 11.3 percent.

“As for the future, our feedback suggests that companies remain cautious, preferring smaller-scale projects they can

Marc Porath, MD at Drees & Sommer

PROPERTY

Geodis Calberson leases 21,000 sqm in ProLogis Park Bucharest

G

eodis Calberson, the provider of logistic and international transport services, has leased 20,790 sqm in Building 4 of the ProLogis Park Bucuresti A1. At the same time, Geodis has extended the leasing contract it has for the 3,490 sqm in the Building 2 of the same park. Following these two transactions, ProLogis Park Bucuresti A1 is now fully leased.

Geodis is part of SNCF (the French Railroad Company.) The park is located

along the Bucharest-Pitesti highway, 23 km west of Bucharest. It comprises four buildings totaling 108,000 sqm of Aclass industrial space. Besides Geodis, other tenants are Augsburg International Impex, cargo-partner, Centrum Logistics, Gefco, Kuehne+Nagel and Omega Transport & Logistics.

The ProLogis portfolio in Central and Eastern Europe comprises 3.7 million sqm located in 41 industrial parks. ∫ Staff

AUTO

Dacia minivan to pull up in 2012

A

fter the Logan, Sandero and Duster, Dacia is preparing a new model tipped to be launched in 2012, according to web magazine Caradisiac.com.

The compact, seven-seater minivan will have five doors and be about 4.6 meters long.

The new model is expected to be constructed on the new Logan platform at the carmaker’s factory in Tanger, Morocco. Prices are estimated to start from EUR 14,000. The range of engines available should be the same as for the Duster, meaning 1.6 16V 105 HP gasoline and 1.5 dCi 90 and 110 HP diesel. According to Caradisiac.com, the new model will be premiered at the Geneva auto show in March 2011. The move comes as Dacia’s

Dacia’s minivan is en route current models have reached new levels of performance. In October this year the Mioveni factory produced the millionth Logan since the model’s launch in 2004.

Dana Verdes

www.business-review.ro Business Review | December 20 - 26, 2010

NEWS 7

FINANCE

TAX & LAW

GE Capital sells stake in joint venture to Garanti Bank

PARTNER CONTENT

“Real change does not roll in on the wheels of inevitability…”

Hemingway described a coach who trained all his fighters, whether small or big, to box like featherweights. This crisis is much like a coach forcing boxers to change their natural approach to the game. While the under-sized and over-sized migrate from their respective domains, the middle-sized are seeing their usual area over-crowded as a result of this shifting.

Which means that nobody is comfortable or safe!

Courtesy of Garanti Bank

All change at Garanti Bank GE Capital and Turkiye Garanti Bankasi have announced changes in the shareholder structure of their Romanian joint venture. GE Capital has sold its 26.7 percent stake in the joint venture to Garanti Bank, which now owns 100 percent of the regulated Garanti Bank and the GE Money-branded specialized financial companies.

Dmitri Stockton, president of GE Capital Global Banking, said, “The rationale to divest our shareholding is based on GE’s overall strategy to increase investment in core industrial businesses including infrastructure and technology, while remaining fully committed to a smaller, more focused GE Capital.”

Murat Atay, CEO of Garanti Group Romania, added: “Both Garanti Bank and the three fincos formerly partlyowned by GE Money will have the same shareholder: Garanti Turkey. (...) The bank and the three fincos are thus reunited under a financial and banking group, Garanti Group, serving more than 450,000 customers in Romania. Furthermore, the newly-formed group provides us with the ability to offer customers a full range of financial services – banking, leasing, consumer finance and mortgages.”

Garanti Banking Group has reached EUR 1.5 billion in assets in the Romanian market, and the bank has registered an increase in assets of 50 percent in 2010 vs. the previous year, with a strong performance in both deposits and loans.

The Romanian operations will all come under the Garanti brand as of January 2011.

Garanti Bank is the second largest private bank in Turkey with USD 87.3 billion in assets as of September 30. Garanti provides retail, commercial, corporate and private banking services to over 9.7 million customers through 862 branches.

GE Capital, the global finance unit of General Electric, offers an array of financial products and services.

Staff

It is thus particularly appropriate to ask the government to adopt measures enhancing economic freedom and supporting the more efficient, competitive and value-oriented exchanges in all markets (resources and labour included).

The government may also be inclined to abandon macro-economics and strategies for interventionist measures, which may now aid certain companies or social categories, though putting at risk the health of the economy on the longer term and creating immediate market distortions.

Which actions prevail and to what avail remains open.

The government won the contest for the largest borrower from the Romanian banks in 2010 as well. Still, many private projects applying for EU funds fail for lack of finance or find it feasible to develop on an equity basis only. What may be at work is the principle that lenders have a particular relationship with risk… they don’t take it!

Then again, when so much finance potential fails to materialize, it may signal a structural rift between supply and demand, whereby money has lost its informative and connective power.

The established legal order was pressed briefly but strongly in an attempt to have pensions taxed as the solution for a severe deficit in the government-run social security system.

The attempt failed, but some other realities remain impossible to ignore: the unemployment rate and the rate of early voluntary retirement peaked at difficult levels at a critical moment for social security funds. In the experience of anyone involved in recruitment in Romania it is common knowledge that many candidates ask how much of the remuneration is paid through the contract, which describes an unchartered category, different from the unemployed or the economically inactive.

Such dynamics reinforce the perception that the current social security system charges too high contributions on a very small base, is largely not enforced at enrolment and collection points and is uncertain as to its future sustainability or worthiness of “return”.

These large pools of economically inactive and unofficially economically active individuals raise legal risks and vulnerabilities, not only for the individ-

Cristina Filip, partner PeliFilip

uals themselves, but for the labor freedom of both employees and employers and for the stability of the social security system, and may severely distort the prevailing practices in the labor market and competitiveness throughout the economy.

The most aggressive taxation change this year increased VAT by 5 units. While its effects are under review, the measure left untouched a system which leads many in Romania to view tax evasion as more effective and affordable than complying with the law. At the same time, by law and not by wordplay, tax evasion is hard to avoid in Romania for small and average undertakings, while a persistent reality is that the government and municipalities continue to register huge arrears in tax returns or public payment execution.

This degree of non-performance is linked to the perception that collection is an arbitrary affair and that justice and enforcement services are unpredictable in outcome, duration and efficiency.

In terms of major sectoral expectations, championing the energy sector only to the extent necessary for state-owned entities to reintegrate has left aside other specific areas of energy investments, where private in-

vestors have long been calling for action. Areas worth mentioning relate to interest in nuclear revival – where the private consortium aligned for units 3 and 4 seems to have run out of steam and patience while waiting for the government to reshape its strategy and lost ground to the surge in the green energy movement – where the investment potential is unjustly hindered by 28 months passing without the green certificates scheme coming into effect.

Public spending on infrastructure was invariably cited as the main driver of economic recovery, though the single largest infrastructure project came to a halt in spring, despite having lined up both publicly tendered construction resources and institutional funding.

Less spoken about is the need to measure each spending item by its long-run return and objective and to expand the definition of civil engineering and construction works beyond basic road infrastructure, including production plants, education and health facilities, energy and communication infrastructure, transportation ports and tracks and relevant interconnection facilities.

While these projects may frequently be done in association by public and private undertakings, it is not mandatory to fund them with public debt. Correspondingly, the legislation needs adjustment to take into account that these projects may involve solutions and structures which are not designable in advance, but may result through tenders or, as the case may be, that the scope of these projects may serve a larger public interest, but not compulsorily qualify as a public asset or service.

At a glance, only a few of the sectors where capital was spent on consumption or investment in 2010 are the same as those potentially creating a comparative advantage or influencing economic growth in Romania, the latter being those activities with intangible components, concerned with the arts, intellectual property, software creation and development, investments in human capital – both education and healthcare – and in technological change.

May 2011 be a year of positive changes and relevant subjects, which may mean that Romania switches to its best fighting style.

www.business-review.ro Business Review | December 20 - 26, 2010

8 TALENT

Ex-teacher brings touch of class to business

∫ ANCA IONESCU Mihaela Dragomir started her career as a high-school teacher in Giurgiu. But despite coming from family of educators, she ultimately chose to enter the tough world of business. “My time spent teaching helped me a lot in my career and my experience in the education system was not a waste of time at all,” says Dragomir. Her first foray into the corporate world was in sales, for which she rapidly showed an aptitude. “I became manager of one of the programs developed by Zepter in a few years. Then I decided to set up my own business, a company specialized in tourism and event organization. It now operates under the name of Ella Traveland.”

And she didn’t stop there. Later on Dragomir founded the Elite Art Club UNESCO Association, which today is one of the most active such organizations in Romania. “I have always had a bent for the

charge of the organization of several events for Zepter. Achievements such as those at the Casino in Sinaia and Romanian Opera House made me see the great potential of that segment. This is the type of business that perfectly suits me but I also love what I do a lot,” says the general manager. Dragomir continues to work for Zepter as an event organizer. “I like long-term partnerships,” she adds.

The most difficult moment her busiprojects of Elite Art Club UNESCO. ness has faced, says Dragomir, was when Although event organization and rents exploded on the local market. tourism are pretty crowded segments at “Then I decided to borrow the money to the moment, Dragomir remains confident buy the current office. Another time, two about the future of her businesses. of my employees decided to set up their own enterprise so I needed to work very “Putting my employees to work with difhard to restart my business from scratch,” ferent professionals such as artists, architects and producers in developing a remembers the businesswoman. But it seems it was a useful lesson for Dragomir. specific project is what differentiates me from the crowd,” says the multi-faceted “The most important thing is to commuentrepreneur. She adds that her companicate with your employees and suppliny focuses on events organized in uners and to perfectly understand your conventional environments, in order to customers. There is no problem that Going places: Mihaela Dragomir offer something special to her customers. cannot be solved,” she says.

Both now and in the near future, Like many other entrepreneurs, art of display and that helped me a lot in Dragomir intends to focus on organizing developing my own business,” she adds. Dragomir has no regrets about her busispecialized medical events. “We know the ness decisions, as they have driven the The first customers of her event commedical environment and medical assogrowth of her firm. If she started anothpany were friends and people who realciations very well. In addition we have the er company she wouldn’t change anyly trusted her. “I started to organize expertise needed to offer medical comthing. “It is useless to talk about luck, as events and then I thought it would be a panies what they really want.” She says it cannot be under our control,” she asgood idea to offer tourism services. So I that 50 percent of her business is now in had to obtain several licenses to practice. serts. As for the challenges her firm has this area. In addition, the former teacher faced, the entrepreneur says there are It is crucial to have your own support for intends to establish an association active plenty of unpredictable circumstances to your events, in order to be able to count which she has had to adapt. Meanwhile, in social responsibility. “We teach people on the reservations you make at different about cultural management. Whoever she continues with her cultural efforts. Jehotels,” says Dragomir. “In addition to succeeds as a volunteer, partner or team unesses Musicales, Painters from Today services for business tourism I later demember will gain a lot in time,” she says. at Balcic (Pictori de azi la Balcic), 10 for the veloped the leisure line.”

X decade (10 pentru deceniul X) and The idea to set up her own business Souvenir of Bucharest (Suvenir de Bucame in 1993 when she started to work for editorial@business-review.ro curesti) are among the most important Zepter International. “There I was in

WHO’S NEWS Pascal Prigent is the new general manager of GSK Romania starting next year. He is taking over from Patrick Desbiens, who has been appointed VP of the primary care operations division of GSK France. Prigent joins the company after working as head of the neurosciences and cardiovascular business unit and at the same time as CMO for Eli Lilly in France. He began his career in the pharmaceutical industry back in 1996 at Eli Lilly.

Gabriela Anton joins Tuca Zbarcea & Asociatii as managing associate after working as partner at Vilau & Mitel for the past five years. With

Established: 1998 Ella Traveland and 2003 Elite Art Club 2008 estimated turnover: EUR 1,386,700 2009 estimated turnover: EUR 1,190,000 Number of employees: 15 full-time and 10 regular collaborators Initial investment: EUR 3,500 Total investment: EUR 300,000

Courtesy of Ella Traveland

With ambitious plans for her business, former high-school teacher Mihaela Dragomir is now going places in the corporate world. The general manager of Ella Traveland intends to enter on the medical events sector in the near future and set up a social responsibility association.

COMPANY PROFILE Ella Traveland and Elite Art Club UNESCO

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

Submissions may be edited for length and clarity. Get in touch at simona.bazavan@business-review.ro more than nine years of expertise, she mainly specializes in banking and finance including real estate finance, as well as M&A. Her practice also covers competition law, corporate/commercial law, real estate and taxation.

Silvana Ivan has been promoted to partner by Tuca Zbarcea & Asociatii.

She works in the firm’s capital markets and securities, as well as corporate and commercial practice groups. She also has a strong background in M&A, as well as in privatization and post-privatization issues. With nine years of professional experience, she has been working for the firm ever since it was founded.

Irina Moinescu has been promoted to partner by Tuca Zbarcea & Asociatii. She has extensive

experience in energy law, with a focus on the electricity sector.

She has been practicing law for the past nine years and has worked for the firm since its formation.

graduated from the Faculty of Law in 2004 and holds an LL.M. in German Law from the Ludwig Maximilian University in Munich.

She is fluent in German, English and French.

has been promoted to partner by Tuca Zbarcea & Asociatii.

Her expertise focuses on litigation, with eight years of experience as a pleading lawyer.

Ana-Maria Taralunga

Ioana Gelepu

Miruna Poenaru joined Badea Clifford Chance. Her practice encompasses a wide range of real estate transactions and projects, as well as various energy projects. Before joining the firm, she worked for a prestigious international law office. She

joins Saatchi & Saatchi as copywriter.

For the past four years she has worked in advertizing at Graffiti BBDO Bucharest. Taralunga graduated from the Faculty of Letters at the University of Bucharest and has an MA in screenwriting from the University of Theater and Film in Bucharest.

Alina Zaharescu joins Saatchi & Saatchi as art director.

For the past 11 years she has worked for Graffiti BBDO. Zaharescu graduated from the Faculty of Arts with a major in graphic design & advertising.

www.business-review.ro Business Review | December 20 - 26, 2010

INTERVIEW 9

Paving the way to international expansion Courtesy of Elis Pavaje

Elis Pavaje has a 19-year history on the Romanian market and is currently leader of the paving industry. General manager Emil Gota talks to Business Review about the company’s current results and steps for the future. ∫ CORINA DUMITRESCU How did the company Elis Pavaje start?

What was the initial investment and what kind of competition existed back then?

It all began over 19 years ago in 1991, when my father, Elisiu Gota, a professional locksmith, had the opportunity to go to Germany at the invitation of former colleagues who were working on a church, the exterior of which was made of concrete pavers. Seeing the pavers, my father thought they might have potential in Romania, since there were no paving products here at that time. This is how the first pavers appeared in Romania, almost 20 years ago. The investment was ROL 1,600, a considerable sum of money back then. Currently, we have a total production capacity of 8,000 sqm/day. It is a significant growth from the 17 sqm/day of paving previously, an accomplishment of which we are extremely proud.

Why have you rejected takeover bids by international groups?

The company has grown rapidly over time, especially since 2004, thanks to a strong distribution chain throughout the country, and the number of orders began to increase quickly. As a result, takeover offers naturally emerged. Interested companies included international groups and investment groups such as RC2 and CRH. We rejected the idea of a takeover for both financial and emotional reasons. Financially speaking, we still have sufficient financial power to continue development and we do not wish to stop here.

Personally, I could not reconcile myself with the idea of owning just part of the company.

What percentage of your turnover is made up of public contracts?

Elis Pavaje has very few direct state contracts

(approximately five percent) obtained through public auctions, most of which are in our production locations: Alba and Prahova.

The other state works are done through our partners, construction or assembly firms, which win auctions and use Elis Pavaje products and services for their works.

Our flagship public works include Transylvania Boulevard in Alba Iulia, street repairs in Orastie and district renovation in Valea Frumoasei Sebes.

The remaining sales are to individuals and real estate developers, a category which also includes entrepreneurs with industrial projects and infrastructure works as well as public institutions in charge of various schemes.

We still have sufficient financial power to continue development and we do not wish to stop here.

What are the company’s main profit reinvestment targets?

The money made over time has been constantly reinvested in equipment for growing and improving the efficiency of the production capacity, and then in the construction of two factories: the first in Petresti (Alba) and the second in Stoenesti (Prahova), opened in 2008.

In its 19 years of existence on the paving market, Elis Pavaje’s investments have amounted to EUR 50 million.

Otherwise, the company’s short and medium-term strategy has been the diversification of its existing product range, as well as the launch of new, precast products, for which there is demand in Romania. Invest-

ments in the assembly service have targeted the purchase of high-performing pieces of equipment, to ensure professional and quick assembly, as well as the continuous training of the team of assemblers. Some 140 employees at the Petresti factory (Alba) received bicycles from the company, to give them a more economical, as well as environmentally efficient, means of transport.

Recently you have developed projects outside Romania, in the Republic of Moldova.

Do you have other such development plans in mind?

In October, Elis Pavaje was tasked by the local branch of the constructor Unger Austria in the Republic of Moldova with the arrangement of an exterior space of 17,000 sqm, belonging to the Cable Factory, active in accessories and board computers, in Balti, the Republic of Moldova. The contract amounted to EUR 340,000.

It is one of the firm’s first projects of such proportions outside the country, and if future opportunities emerge, we will not hesitate to serve clients outside the country with the same involvement and enthusiasm.

How has the crisis affected Elis Pavaje?

I believe that debt recovery was and continues to be the hot topic on the construction market in Romania this year. In order to face this issue, we’re paying increasing attention to new clients who order our products, and being more cautious over the commercial conditions that we stipulate. In terms of demand, the number of current contracts shows us that 2010 is better than 2009, when the majority preferred not to make investments.

The first semester of this year has shown positive signs for the market. The

CV Emil Gota 2009 Appointed GM of Elis Pavaje, in charge of strategy, planning and business development 2001-2009 Served as economic director of the company growth is owed both to newly introduced products, as well as to our gaining some of our competitors’ market share.

How about your employees – how many are there, and do you intend to hire more?

Currently, Elis Pavaje has 360 employees and a production capacity of 8,000 sqm/day. Half the employees work in the two factories in Petresti and Stoenesti, and the rest deal with the distribution and pavement fitting. We will continue to hire and to invest in the training of our employees, with regard to our future development.

What are your estimations for 2010 concerning turnover and profit? How about for 2011?

With a turnover of RON 60 million in 2009, Elis Pavaje is the leader on the pavement market in Romania.

In 2010, the market of prefabricated products of small dimensions (residential and industrial paving, terrace tiles, curbs, gutters) is estimated at around EUR 75 million and a volume of almost 9 million sqm.

All in all, we expect 2010 to bring an increase in turnover of around 10-15 percent and we are optimistic for 2011, which we believe will stay at the level of 2010.

corina.dumitrescu@business-review.ro

www.business-review.ro Business Review | December 20 -26, 2010

10 FOCUS

All I want for Christm Christmas comes but once a year – to the chagrin of retailers. Business Review looks at how the festive season is likely to impact the beleaguered retail market this year, before getting down to the serious business in hand: what to buy the man or woman who has everything? Whether it’s tango or tablets, bikes or baking that your loved one loves, we can suggest the presents to spread festive cheer at the end of a testing economic year. Ho ho ho!

∫ STAFF Statistics on local household consumption suggest retailers’ prospects for holiday season sales are providing little reason for Yuletide cheer. A recent GfK study found that household consumption had gone down 5 percent when expressed in the national currency, compared to the first three quarters of 2010. Analysts say this is because Romanian shoppers have got accustomed to pay more attention to what they are buying.

Non-essential non-food products registered the biggest value drop, of more than 9 percent, the main reason being a drop in shopping frequency. Larger products and hypermarkets’ own brands have gained a lot of ground in this context, although, compared to other countries in

Eastern Europe, the value of own brands in the total FMCG mix is one of the lowest: 5 percent compared to the 18 percent average.

When it comes to Christmas shopping, the statistics seem even less encouraging.

Fashion retailers get a glimmer of hope. A survey conducted by GfK CR Academy Brussels on behalf of The Wall Street Journal Europe, which polled 12,750 people in 12 European countries and the US about their gift-giving habits, revealed that half of Europeans plan to give clothing and accessories such as bags or scarves at Xmas, making it the No.1 gift.

Around 31 percent of the Romanians questioned in the survey said they had no plans to spend money this year on Christmas presents. Some 44 percent of respondents were planning to spend from

EUR 1-50, 11 percent EUR 51- 100, and 6 percent between EUR 101 and 260. Only around 1 percent of those questioned said they intended to splash out between EUR 250 and EUR 500 on Christmas presents.

The majority of Romanians questioned – around 66 percent – mean to spend less this Christmas than three years ago, with 71 percent of respondents saying they will go shopping in a large store, supermarket or hypermarket.

Only 2 percent of those questioned said they would do their shopping online.

Just like other Europeans, Romanians plan on giving clothing and accessories as a gift (59 percent of those who answered), followed by cosmetics (28 percent) and books (10 percent). Read on for more festive gift ideas.

ECO AND TRADITIONAL If you are looking for environmentallyfriendly Christmas gifts, trying to send a message about the importance of green behavior at a time of excess or simply looking to support local traditions and products at the end of a tough year, we have listed some eco-options for you below.

Topoloveni Gem The only Romanian product recognized as geographically protected within the EU, the gem is made using a traditional recipe from Topoloveni, in the Arges area of Romania, with no added sugar or preserv-

www.business-review.ro Business Review | December 20 -26, 2010

FOCUS 11

mas... BR’s gift ideas The Christmas Fair – Peasants Market When: December 2-23 Where: In the parking lot at Real Pallady and Real Berceni galleries

ident of Libra Bank, and his wife. Average prices are about EUR 500. More details and prices can be found at www.mosionroata.ro.

The fair is organized by Tactic Events, and showcases a large variety of traditionally-made products, as well as hand-crafted products and clothes.

Velorbis bicycles

Agronomie Fair When: December 18-23 Where: 61 Marasti Bld, next to the Agricultural Sciences Academy

Brompton bicycles

Those interested in buying traditional Romanian food products – perhaps to serve at Christmas dinner – can also check out the fair at Agronomie, The Winter Festival. The organizers say visitors can find there all sorts of gifts in the form of traditional food products.

For those interested in finding out more about the Romanian custom of sacrificing a pig, fair organizers have in store a presentation of all the stages of the process and how to prepare the meat in traditional ways.

Other year-round traditional product fairs: Crangasi Traditional and Ecological Products Fair The fair is open Thursday to Sunday except for December 23-26, December 30-31, January 1-2.

Drumul Taberei Traditional and Ecological Products Fair The fair is open Thursday to Sunday except for December 23-26, December 30 31, January 1-2.

Gorjului Traditional and Ecological Products Fair The fair is open Thursday to Sunday except for December 23-26, December 30-31, January 1-2.

The Peasants Fair

atives – ideal for maintaining your health over the festive season.

Sonimpex Serv Com revived the brand after 1989, and now packages and sells it.

You can find it in hypermarkets or at traditional product fairs

Where to get it The Christmas fair When: December 21-23 Where: Bucharest National History Museum The fair is organized by the Maramures Association of Producers of Traditional and Ecological Products, which brings together independent local producers.

www.maramurestraditional.ro

The fair takes place every Saturday and Sunday between 9:00 and 16.00 at The Ark (the former Commodities Exchange) on 196, Calea Rahovei. It is organized by the Radu Anton Romania Initiative Group.

More info on the fair can be found at www.targultaranului.ro.

Cycling Cycling and the setting-up of lanes for cyclists have been one of the trends of this year, fueled by both a switch towards less polluting means of transportation and a movement towards more healthy, active lifestyles. If you want to take a ride in Bucharest with a new bike, here are some suggestions for you – once the snow has cleared. There’s no better way to shift those few extra Christmas pounds and save yourself petrol money into the bargain!

Felt bicycles are available at the Mos Ion Roata showroom, opened by Emilian Bituleanu, pres-

Danish-made design and vintage bicycles, Velorbis are available from EUR 6801,030. More info is at www.velorbis.ro.

UK-made foldable Brompton bicycles are available through several local dealers, all listed on the company’s Romanian website www.brompton.ro

Other places where you can shop for bicycles are listed below www.bikezone.ro www.carrefour.ro www.veloteca.ro www.orbea.ro

CHARITY If you’re looking to give something back this holiday season, a local website charitygift.ro suggests a wide range of options for those wishing to make a donation when buying a gift. The product providers for the site direct some or all of the purchase price to a social cause they are committed to supporting. If you cannot find the items you were looking for, you can order personalized gifts, and ten percent of the price of the products bought will be donated by the CharityGift Association to an organization selected by the buyer. Elsewhere, a round-up of NGOs and CSR activities can be found in the yearly BR review of philanthropy.

GADGETS & IT Christmas is traditionally a time for playing with the latest gadgets! A wide range of options is available for local techies, from the iPad to the latest iPhone model, now available from several local telecom operators. Business Review suggests a few of the big-name ones.

iPad Dubbed by many the tech launch of the year, the iPad is available locally from several online retailers such as Diverta, at dol.ro, emag.ro, or at Media Galaxy stores.

Prices range from EUR 627 to EUR 999, depending on the model. Several other tablets are available locally as well.

Samsung Galaxy Tab is available from Orange at EUR 229. It has a 2GB memory that can be extended to 3GB. Another tablet from the same telecom operator is the Orange tablet, whose selling price starts at EUR 99 with a subscription. It has a 7 inch touch screen and was developed on the Android 2.1 operating system.

More info at www.orange.ro.

Romanian products The Allview AllDro tablet PC starts at EUR 200. It has a 7 inch display and runs on an Android operating system.

The Evolio Evobook eReader is available at EUR 150 and can also be ordered through www.LibHumanitas.ro. It comes equipped at purchase with content from Mircea Cartarescu, Gabriel Liiceanu, Constantin Noica, and Mateiu I. Caragiale.

More titles can be purchased from the Humanitas online store.

FASHION The local fashion scene has seen plenty of new talent lately, and many designers are marketing their work intensively in the online world. If you are interested in giving an original piece by a local fashion designer be sure to check some of the websites listed below. www.marialuciahohan.com www.zuzahandmade.ro www.breslo.ro chouchou.ro

Vlieger & Vandam A new addition for fashionistas are the art bags from Vlieger & Vandam. They are the work of Dutch designers Carolien Vlieger and Hein van Dam, who started their accessories line in 2002. The first collection of bags were produced from secondhand bags and referenced Hitchcock’s Psycho. In 2005 the Museum of Modern Art in New York included them in its Safe, Design Takes In Risk exhibition.

In Romania, they are available through Createur D’Emotions or at:

www.createur5demotions.com

HOBBIES Cooking Classes If you want to impress your family or dinner guests with an elaborate Christmas feast, or plan to adopt a new, improved diet in the New Year, and are looking to upgrade your cooking skills accordingly, there are a few places in Bucharest that offer training and even the possibility to rent a professional cook.

Société Gourmet offers cookery classes, including private lessons, private chef services and “team cooking” workshops for companies. The most popular classes that the company offers are 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,” says Raluca Ichim owner of Société Gourmet.

The cooking style is international and the lessons 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 cook-

www.business-review.ro Business Review | December 20 - 26, 2010

12 FOCUS

Courtesy of Apple Courtesy of Brompton

ery classes vary according to the number of participants, menu chosen and number of workshops.

For more information visit:

www.societegourmet.ro

Carol Parc Hotel 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.

For more information go to:

www.carolparchotel.ro

Violetas’s Vintage Kitchen If you are intered in baking, Violetas’s Vintage Kitchen offers bread and sweetbaking 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.

For more information go to:

www.violetas.ro

Outdoor and… indoor Ice skating If you find yourself in Bucharest during the holidays and want to take the family on a Christmas outing, ice skating is the most popular option this time of the year. Entry tickets to ice skating rinks in Bucharest usually start at RON 10 and most offer skate rental for around RON 15.

You can find outdoor ice skating rinks at the Baneasa Shopping City and Sun Plaza shopping centers as well as in the Cismigiu, Herastrau, Tineretului and Unirii parks and the Drumul Taberei neighborhood. Indoor rinks can be found at AFI Palace Cotroceni and Liberty Center malls as well as the Mihai Flamaropol ice skating center and the one located in the Floreasca neighborhood.

Horse riding Another option – provided you remember to wrap up warm – is horse riding.

Whether you’re a passionate rider or a curious novice, there are a few options on the outskirts of Bucharest.

A 30 minutes riding lesson starts at RON 50 with the possibility of booking a course of about 10 to 12 lessons. Some of the equestrian clubs in Bucharest require riders to wear special equipment.

Riding clubs in and around Bucharest include:

Arkadia Horse Ciofliceni village in Snagov 0722 243 227 www.arkadiahorse.ro Clubul de Echitatie Bucuresti 2, Jandarmeriei St. 0726 284 224, 0731 330 090 Hipocan Corbeanca 68, DJ101,Corbeanca 0741 100 214 www.hipocan.ro Mogosoaia Equestrian Academy Mogosoaia, 28 Zamfirei St, 021 211 52 74, www.herghelia-dulugeac.ro Piccadilly riding club 542 Bucharest-Ploiesti Road, 0744 293 942 www.piccadillyhorses.ro/club-echitatiebucuresti

www.business-review.ro Business Review | December 20 - 26, 2010

FOCUS 13

CARMEDIA wins the 2010 "Innovation” business award, from the French Chamber of Commerce in Romania

Photo: Laurentiu Obae

Robin Hood DN1 Bucuresti-Ploiesti, Potigrafu www.robinhood.ro

Dance classes For less outdoorsy types, why not get dancing! Tango is a popular choice for Bucharesters and there are quite a few local dancing schools that offer lessons for newbies and professional dancers alike. As well as showing off your newly acquired fleet-footedness at all the Christmas and New Year’s parties, dancing makes a great gift, and is a fun and effective way to get rid of your extra weight and trim up for 2011.

At Tangotangent dancing school, lessons are organized for four levels. Beginners take 24 classes over three months that teach the basics of Argentinean tan-

Estudio Tango Real Tango practice takes place each Friday at Estudio Tango Real (30 Pache Protopopescu Blvd) and the Dalles Galleries at 20:30. Other tango schools in Bucharest are El Tango and Barrio de Tango.

A start-up called CARMEDIA also won an award this year, in the Innovation section. The jury considered the young company has been bringing an outstanding marketing innovation in Romania, by introducing advertising through cars.

CARMEDIA was created by 3 French entrepreneurs and 1 Romanian, in Bucharest, in September 2010. The company is offering three types of advertising services through cars. The first one is carvertising and the idea is to use private cars (covered with ultra-designed stickers) as a new advertising tool, in order to promote companies’ brand, image, products or services.

Besides carvertising, CARMEDIA is also offering company car covering (the company is branding the car fleets of its clients) and taxi covering (by sticking ads on taxi vehicles and using their light cassettes as well, in order to achieve brand visibility in Bucharest 24 hours / day).

Balet Giuliana Studio Those who dreamed of becoming ballerinas when they were kids but have passed that age, can indulge their childhood ambition with a less common gift, ballet classes for adults.

Balet Giuliana Studio offers ballet lessons for anyone aged between 4 and 40.

A one-month course with two classes per week costs RON 120.

Althrough Carmedia is the first company to offer carvertising services in Romania, company car covering and taxi covering already existed before. However, Carmedia brings unmatched value-added to it locally, by using high-quality stickers (all imported from Germany) and graphical design services which are taylor-made to match both the medium and the clients needs.

More details about the company www.carmedia-group.com

ADVERTORIAL

Tangotangent

go. A class costs RON 25 and lasts for 75 minutes.

By the end of the course, students should be able to dance freely and confidently attend milongas (an event where the tango is danced).

Every year, the French business community is meeting for its traditional gala event. This year’s edition took place on December 12th at World Trade Plaza, in Bucharest. The event gathered 350 people, including the most influent key-decision makers representing the business interests in the country. The jury awarded some of the main French companies doing business in Romania, including Groupama Asigurari, Renault Technologie Roumanie and BRD-Groupe Société Générale, in three sections: Best Investment, Social initiative and Innovation.

www.business-review.ro Business Review | December 20 -26, 2010

14 YEAR IN REVIEW

Firms happy to see back of bleak 2010 The telecom & IT industry has had a lively year in spite of general reduced consumption woes. But the healthcare sector struggled. Starved of funds from the GDP, the system was plagued by malpractice scandals, lack of predictability and the migration of medics abroad or to the private sector. Retail fared little better. In the first half of 2010 the local retail market was estimated to have dropped by about 10 to 12 percent. Less consumption by costconscious shoppers translated into lower sales and forced retailers to scale back their expansion plans. On the car market, Dacia and Ford were saved by exports, while oil producers Petrom and Rompetrol have seen their results go into freefall. All this against a backdrop of fiscal volatility and unpredictability that mired players in all sectors in a pit of uncertainty. But does 2011 promise to be a happier new year? ∫ DANA VERDES, OTILIA HARAGA, SIMONA BAZAVAN

STOCKEXCHANGE

As far as the local fiscal scene goes, 2010 was ruled by the sign of change and a subsequent state of uncertainty. The government found itself caught between the devil and the deep blue sea, having to comply with a strict set of austerity measures required by the International Monetary Fund (IMF) on one hand, and the need to reboot the economy on the other.

Romania and the IMF signed a EUR 13 billion loan agreement last year, as part of a larger package (EUR 20 billion) that includes funds from the EU, the World Bank and other foreign lenders. So far, the country has received around EUR 11.27 billion from the IMF and another EUR 3.65 billion from the EU. Romania should get its seventh disbursement from the IMF, worth almost EUR 900 million, in January, a month later than previously agreed. Discussions over a potential new loan agreement will also begin this January, said Prime Minister Emil Boc last week, on a TV talk show.

In an attempt to increase budget revenues and stick to the 6.8 percent budget deficit agreed upon with the IMF for 2010, the government hiked some existing taxes, introduced new ones and expanded the tax base.

Taking tax levels alone, with the exception of VAT and social contributions, Romania still remains an attractive fiscal environment. But it is more than the taxes themselves that counts, investors argue. Predictability and stability, two of the main requirements of running a business and investing in a country, were ignored by the authorities, undermining Romania’s credibility as an investorfriendly economy.

VAT was hiked almost overnight in July from 19 percent to the current 24 percent. Three months later, VAT could have dropped to 5 percent for food staples after the Romanian Chamber of Deputies unanimously passed a bill on this matter and exempting pensions lower than RON 2,000 from income tax. The two bills lacked government support, with MPs

Hard times: many companies are hoping that their luck will change in 2011

from the ruling Democratic Liberal Party (PDL) saying at that time that they had voted in favor by accident. Had the bills been passed by President Basescu it would have cost the Romanian state an estimated EUR 1 billion per year.

Other changes related to the business environment that were adopted this year included new rules on the treatment of income from professional activities, registration in the Registry of Intra-Community Operators, plus changes to the norms of the fiscal code covering individual and corporate tax, VAT and excises, and the procedure for issuing a certificate for the deferment of VAT payment on the import of goods. Also, in October the minimum tax was removed, and as the change came at mid-year the 2010 fiscal year will be divided into two different fiscal periods.

The government’s fiscal bumbling sent more and more local companies south to neighboring Bulgaria, which, tax specialists say, promises lower taxes and less red tape.

According to media reports, about 300 Romanian companies are believed to be registering each month in the Bulgarian town of Russe alone.

Tax hikes and subsequently higher compliance costs should have been the options of last resort while the modernization of the fiscal legislation and administration remains only wishful thinking, companies argue. Many taxpaying firms complain that they are paying the bill for the authorities’ inability to efficiently collect money and fight tax evasion.

This view is shared by local NGOs that promote the interests of the local business community and foreign investors active in Romania.

Business relocation is an option for any company nowadays and this is why Romania should consider reforming its labor and fiscal systems, said Sorin Mindrutescu, president of the American Chamber of Commerce in Romania (AmCham Romania), recently. Local business organizations have also called for more transparency and the need for a real dialog between the authorities and the business community.

www.business-review.ro Business Review | December 20 -26, 2010

Show me the retail The dynamic growth of the Romanian retail sector ended with the crisis. The sector boomed during 2007 and 2008, when sales grew at an annual rate of more than 20 percent. But in the first half of 2010 the local retail market is estimated to have dropped by about 10 to 12 percent.

Lower consumption translated into lower sales, especially for FMCG products, and forced retailers to scale back expansion plans. So far, the recipe for success seems to have been promotions and sales, a focus on proximity outlets and the addition of new formats as well as launching private labels. The only segment that remained untouched by the crisis was fashion. Retail sales in clothing never stopped growing, according to a Candole report, and new names are expected to join the fray next year.

In the first nine months of 2010 international retailers present locally opened 76 new outlets while five existing ones were shut down, according to data from a PwC Romania study on the local retail market, put together by Radu Stoicoviciu, partner in transactions, and Mihaela Danilov, manager in transactions.

About 12 new hypermarkets were opened, 3 cash & carry outlets, 31 supermarkets and 30 discount units. The closures included three Carrefour Express outlets and two units belonging to Interex.

Since the beginning of the crisis, the segment of small proximity stores has been hit the hardest, according to retail auditor MEMRB. About 3,300 small shops and 900 kiosks are estimated to have closed between 2008 and October 2010, according to the same source.

While up until now opening large hypermarkets was the thing, last year saw a U-turn. Little is the new big, as local retailers pin their hopes on this change. The

YEAR IN REVIEW 15 trend was set by Mercadia Hollander BV, owned by local businessman Dinu Patriciu, and its Mic.ro concept.

The traditional store network is tipped to reach 1,000 fixed shops and 2,000 mobile outlets on wheels by the middle of next year.

According to Patriciu, the break-even point is estimated for April 2011, 12 months after the business was opened.

Mega Image, the company that runs supermarkets with the same name and others called Red Market, is employing a similar strategy and launched its own version of the proximity store, the Shop & Go concept, at the beginning of December.

The first outlet of this kind was opened this month in Bucharest. With a total area of 170 sqm, it offers about 2,000 products, most of which are food items. Run by Belgian group Delhaize, Mega Image is estimated to end 2010 with a total network of 72 outlets.

After being acquired by Private Equity Enterprise Investors, the Profi chain announced that it would change from its current discount format to the proximity store model.

Other players have also taken steps towards scaling down their formats. Carrefour focused this year on developing its supermarket chain branded as Carrefour Market.

The retailer operates 23 hypermarkets in Romania and its 31st supermarket was opened last week in Cluj. This November, Cora opened a hypermarket in Baia Mare with a surface of only 4,500 sqm, less than half the size of its previous ones.

German retailer Metro Group is also betting on smaller units. Metro Cash & Carry Romania opened its fourth Metro Punct outlet last week in Targoviste. The retailer established its first such store this May in Satu Mare as a new concept on the

NEW KIDS ON THE BLOCK Despite the testing economic times, 2010 saw new brands and new players launching local operations. Others have announced plans to weigh in next year.

McDonalds Romania opened the first local McCafe in Bucharest following a EUR 200,000 investment. The McCafe is located in the existing McDonald’s outlet in Unirea Shopping Center.

The outlet will serve 17 types of coffee, costing from RON 5 to RON 11. It has 44 seats. The first McDonald’s restaurant opened in Romania in 1995.

The company currently has 63 restaurants in 21 cities across Romania, and a daily flow of 140,000 customers.

Google established a local presence in Romania this November by opening an office in Bucharest. The firm’s local team is headed by Dan Bulucea, formerly business and marketing director of Microsoft Romania.

The Bucharest office will be responsible for developing Google's presence and strategy in Romania, establishing business relationships with Romanian partners, educating local companies about the benefits of going online and direct advertising sales.

Austrian crystal manufacturer Swarovski is considering investing in a production unit in Romania, according to media reports. The company is al-

legedly negotiating the opening of a crystal factory that could require an investment of about EUR 10 million with local authorities in Cluj.

Swedish fashion retailer H&M will open six stores at the same time in Romania next year. Two of the outlets will be located in Bucharest in Baneasa Shopping City and AFI Cotroceni. Three more stores will be opened in Iasi, Timisoara and Cluj-Napoca in the Palas commercial center and the Iulius Malls.

Another outlet will be established in Constanta in the Maritimo Shopping Center, the former Polus Center Constanta.

The first Gucci mono brand store will open in Bucharest by mid December this year, according to CPP Luxury Industry Management Consultants Ltd. The store will cover a surface of 280 sqm and will be located on the ground floor of the Athenee Palace Hilton.

“Gucci will have the best location in Bucharest, not only being positioned in the very heart of the city, on the leading shopping high street of Calea Victoriei, but also being on the right section of Calea Victoriei, with steps from secure parking facilities, and with large windows assuring excellent visibility,” said Oliver Petcu, managing director of CPP Luxury Industry Management Consultants Ltd.

www.business-review.ro Business Review | December 20 - 26, 2010

16 YEAR IN REVIEW

YEAR in numbers

6 shops of the Swedish fashion retailer H&M are expected to open on the local market next year in Bucharest (2), Iasi, Timisoara, Cluj-Napoca and Constanta

local market, exclusively targeting resellers. Proximity and ease of shopping are the benefits of the new concept, the firm says.

Confident in the local economy, retailers have developed their local business in the past few years both through organic growth and through mergers and acquisitions. M&A activity is expected to decline as Romanian retail is dominated by large international players who will continue developing through organic growth and a series of local retailers have entered insolvency, read the PwC report. The most important transactions this year were the takeover of miniMax Discount

by Mercadia Holland BV and the acquisition of the local low-cost chain Plus by German discount supermarket chain Lidl.

The last quarter of the year was busy with new openings in fashion. German retailer New Yorker opened two new stores in November, bringing its local network to 16 units. Swedish fashion retailer H&M announced it would set up six shops in Romania next year.

Iditex Group, which owns brands such as Zara and Pull & Bear, opened its 13th Zara store on the local market in Pitesti in early December following an aggressive expansion campaign this year.

Six out of the 13 are located in Bucharest.

In September the fourth Bershka shop was opened in the capital in Unirea Shopping Center.

Iditex operates over 50 stores in Romania under the following brands: Zara (13 stores), Pull & Bear (10), Stradivarius (9), Oysho (4), Zara Home (3), Massimo Dutti (2) and Bershka (10). Inditex posted a turnover of EUR 75 million in Romania last year, from a network of 36 shops.

stays at 9 percent. The methodology for calculating the prices 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. Also, 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.

Implementation norms of the clawback mechanism were approved this year.

These stipulate that the license owner who sells subsidized medicines must pay the state a percentage of the turnover generated by all the prescription drugs it sells. This should be applied retroactively starting from January 2010.

A very important measure being brought in is co-payment, which could be applied for all medical services starting next year. This is currently still in project stage.

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.

On the other hand, the market of private medical centers is in robust health.

MedLife supplemented its investment program to EUR 45 million, to be invested by 2013. The operator is in negotiations for making three acquisitions outside Bucharest, one of which may be

concluded before the end of the year.

MedLife currently has spaces for medical units with a total surface of 25,000 sqm.

Newly announced projects include a hospital in the Telegraf building in Bucharest (10,000 sqm), a pediatrics hospital in Baneasa (5,200 sqm) and the Obor and Titan clinics (3,800 sqm).

MedLife took over an 80 percent stake in Policlinica de Diagnostic Rapid in Brasov in June, for which it paid in excess of EUR 3 million. Also, it started construction works at a hospital (of 6,000 sqm) and clinic in Brasov.

This March, investment fund Advent International acquired 80 percent of Centrul Medical Unirea (CMU), which has an investment plan in excess of EUR 20 million for the next two years. CMU took over the Euroclinic Hospital and Euroclinic Medical Centers in Romania from insurer Eureko. It also opened a new medical unit in Bucharest, CMU Dorobanti, following an investment of approximately EUR 1 million. And CMU opened the Center for Medical Investigation Bacau, following an investment of EUR 1 million. The medical chain announced its intentions to open a location in Sun Offices in Bucharest (1,200 sqm) in the first trimester of next year.

Meanwhile, 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, having so far opened four clinics in Bucharest and a central laboratory.

Innovative areas of medicine were not neglected. This year Biogenis opened a new stem cell storage bank. Until then, the firm had stored stem cells in its bank in Poland.

Public healthcare sector ails while private centers thrive The public health system was poorly last year, plagued by malpractice scandals, lack of predictability and staff desertion.

The sum allotted from the GDP to the health sector was not sufficient to alleviate the serious problems facing the sector. The most notorious scandal that shook this sector was the tragic fire in Giulesti hospital which left five new born babies dead and several others severely injured. Meanwhile, medics are leaving the country or opting to work in the private sector in search of better paid jobs.

The IMF prompted the government to approve in August the payment of EUR 454 million in arrears for the health system. Legal measures that affected the system included the increase of VAT from 19 to 24 percent for products, except prescription medication, where the rate

Cleaning up: in a tough year the Duster was a rare bright spot, doing well abroad

A new entry on the market was that of Turkish private medical care provider Medicana Hospital, one of the largest private chains in Turkey, which announced that it intended to build a hospital with a surface of 10,000 sqm on a land plot it owned in Bucharest. The investment was announced at USD 30 million.

Similarly, West Eye Hospital Group also established a presence in Romania after opening the first ophthalmology hospital in Bucharest, West Eye Hospital.

The hospital took two years to build and covers 1,400 sqm.

After opening a central laboratory, Medicover announced plans to start a hospital unit project next year, to be opened in mid-2011, after which new clinics will follow.

Telecom & IT: new entries, new openings, new appointments at the top This year was the year when the telecom market started to put a brake on its decline. Revenues on this market will still be affected by the recession this year but to a lesser extent than in 2009. Last year, the market reached EUR 3.9 billion, a 15 percent decrease compared to 2008, according to data from the National Authority for Management and Regulation in Communications (ANCOM). Operators saw a decline in the number of subscribers for mobile and fixed telephony.

However, the broadband internet segment was on the up.

Employees in the IT sector escaped having to pay a tax on their earnings, after the authorities initially announced their intention to axe the tax exemption for IT programmers, as part of the austerity measures.

The Romanian state announced its intention to sell the stake it has in Romtelecom, for which it hopes to get EUR 1 billion. The Romtelecom shareholders are the Greek group OTE which has a stake of 54.01 percent, and the Ministry of Communications, with a stake of 45.99 percent. German operator Deutsche Telekom has a participation of 30 percent in OTE. The state asked OTE officials to come up with a price offer for the shares that the state owns in Romtelecom by the end of the year.

This year Google established an official presence in Romania by opening an office with a local team headed by Dan Bulucea, formerly business and marketing director of Microsoft Romania. The company also launched the Google Maps Street View service, covering 6,000 kilometers in Romania, which will be available in eight cities, the main ski resorts on Valea Prahovei and the Black Sea Coast.

Software company Intel also opened a Software Development Center following an investment of several million EUR. The center will initially employ around 25 specialists in software R&D, but the number will increase three or even fourfold, as the projects diversify.

Changes at the top took place in several large companies, such as Vodafone, UPC, Microsoft and Xerox. While Vodafone and Microsoft brought expats into their management line-ups, UPC and Xerox named Romanians at their helms.

Inaki Berroeta became the new CEO of Vodafone Romania, having formerly been CEO of Vodafone Malta, since July 2007. Liliana Solomon, who was CEO of Vodafone Romania for five years, was promoted to manager of operations for the

www.business-review.ro Business Review | December 20 - 26, 2010

YEAR in numbers

300 Romanian companies are believed to be registering each month in the Bulgarian town of Russe, lured by lower taxes and less red tape

YEAR IN REVIEW 17 Orange finished this year a EUR 4 million franchise program. A total of 171 shops were opened in 82 locations under the Orange Store umbrella. At the moment, Orange Romania has a distribution network of 99 own stores, 171 shops opened in franchise, 117 points of sale based on a partnership with retail chain Euro GSM and 77 with Say network.

Last but not least, Panasonic established two concept stores this year. The first was opened in Unirea Shopping Center, following an investment of EUR 100,000. Panasonic officials expect the store to generate sales of approximately EUR 1 million. The second Panasonic store was opened in Focsani, costing EUR 50,000. The shop is expected to generate sales of approximately EUR 500,000 over the next year. Panasonic is also looking into opening a new concept store in Cluj-Napoca.

Telecom operator RCS & RDS launched Zece TV, a generalist TV station, this month. The new station’s project manager will be Radu Morar, former anchorman and TV producer at B1 TV.The company announced it would put EUR 10 million into the TV channel which is meant to attract more subscribers to its services, in a battle with competitors Romtelecom and UPC Romania.

Europe region. Pole Ronald Binkofski replaced Calin Tatomir as general manager of Microsoft Romania and will continue to implement cloud computing as one of the main priorities Microsoft has announced it will pursue during the 2011 fiscal year (July 2010-June 2011). UPC Romania appointed Severina Pascu, formerly CFO of the company, as CEO starting with January next year. She will be replacing Jack Mikaloff, who will retire at the end of the year.

Elsewhere, Gabriel Pantelimon was appointed country general manager of Local carmakers’ sales driven Xerox Romania and the Moldova Reby exports public. Formerly sales and marketing diThe automotive sector has been to hell rector at Xerox Central Eastern Europe, Isand back this year. At the beginning of rael and Turkey, Pantelimon replaced 2010 local carmaker Dacia was debating Petr Sichrovsky. the best business solutions to survive on There were also strategic changes. a market that seemed to have run out of Telecom operators switched their apgas. “In 2010, it would be a great achieveproach regarding their outlets this year. ment if we got to some 90 percent of last Some of them enlarged their network, year’s production, which was 130,000 while others revamped their stores to imunits,” said Constantin Stroe, Dacia’s VP, prove the customer experience when recently. showcasing their latest technology.

The carmaker responded with the UPC launched the first store under its new Duster model and exports. And new design in January on Mihai Bravu this proved to be Dacia’s winning ticket: Street, injecting approximately EUR the new SUV model, the Duster, was 200,000 into the new concept at the launched in March this year and cleaned 130-sqm location. Three more were then up on foreign markets. opened in Bucharest, and one each in “For Dacia, 2010 is the year of the Ploiesti, Bacau, Galati and Cluj. The Duster. The new model, launched in shops were opened mainly in street loMarch at the Geneva auto show, became cations on surfaces of 100 sqm. Over the a true best-seller in Europe, recording next year, the concept will be rolled out more than 90,000 orders by the end of to other big cities, Timisoara being on the last month. The Duster was among the list.

4x4 segment leaders in highly competiSimilarly, Romtelecom chose to apply tive markets, such as Germany and a new concept to some of its stores, based French,” Silviu Sepciu, media relations on Deutsche Telekom standards, to reposervice chief at Dacia, told Business Resition itself. Romtelecom now has four view. such stores trading, two in Bucharest, He added: “In terms of commercial reone in Constanta and the other in Braila. sults, about 90 percent of Dacia’s proOn average, an outlet is around 80 sqm. duction this year was exported. In RoEach required an investment of several mania, on a market strongly impacted by tens of thousands of EUR. The operator the crisis, Dacia has managed to consolhas also opened three kiosks in AFI idate its market share.”

Cotroceni and Baneasa Shopping City in Officials cite “fluctuations in salaries, Bucharest and in Polus Mall in Cluj. which at Dacia have increased three fold GSM retailer Cosmos Mobile also in the past five years, and exchange rate opened two concept stores this year in the instability eroding the value of investcapital. The firm’s average estimated inments in Romania” among the difficulties vestment in opening a concept store is encountered in day-to-day operations. around EUR 50,000. Depending on the loThe carmaker’s officials also bemoaned cation, the retail area of a Cosmos Mobile the economic instability. “Compared concept store is on average 40 sqm. with 2009 the economic environment has Fonomat became a Vodafone excludeteriorated: lending reductions, public sive partner following a deal. This added sector salary cuts of 25 percent and the in166 stores to the Vodafone network. With crease in VAT have destabilized the ecoa total retail surface of over 7,000 sqm, nomic environment,” said Jerome Olive, Fonomat shops can now be found in 96 COO of Dacia and Renault Group Romacities in Romania. Previously, Fonomat nia. Meanwhile, Ford’s operations in Rowas a dealer for Orange Romania but the mania this year can be summed up as three-year contract between the two “more investments, less return”. By the companies reached maturity. » continues on page 19

www.business-review.ro Business Review | December 20 - 26, 2010

18 YEAR IN REVIEW

From boom to bust: insolvencies spread INSOLVENCY CASES IN BRIEF

Insolvency has shot up in 2010, both in terms of the number of companies and the value. Big names such as Boom, Leonardo, Tiago Malls, TCE Logistic, Diverta and Flanco have had to seek solutions to pacify the creditors knocking at their doors. However, it seems that the eye of the storm has passed: next year insolvency practitioners foresee a decrease in the rate of new insolvency proceedings.

FLANCO INTERNATIONAL Bucharest Field: appliance retailer Value of fixed assets: RON 26 mln No. of employees: 600 Liabilities: RON 307.6 mln Procedure status: reorganization

ULTEX Tandarei Field: oil and refined fats producer Value of fixed assets: RON 88,3 mln No. of employees: 168 Liabilities: RON 98,1 mln Procedure status: observation

Clasmotor Oradea Field: official Toyota dealer in Oradea Value of fixed assets: RON 10,2 mln No. of employees: 25 Liabilities: RON 15.1 mln Procedure status: confirmed plan

Construct MOD Oradea STOCKEXCHANGE

Field: road construction works Value of fixed assets: RON 29 mln No. of employees: 352 Liabilities: RON 71.3 mln Procedure status: observation

Lockdown: many companies, including big names, have faced insolvency this year

STANDARD SNACKS Bucuresti

∫ DANA VERDES

Field: pastry products producer Value of fixed assets: RON 21,2 mln No. of employees: 65 Liabilities: RON 63,3 mln Procedure status: observation

Construction, real estate, metallurgy, food and textile production and transportation are the areas which saw the most insolvency this year.

City Mall Bucharest, Fortus Iasi, Ultex Tandarei, Boom, Leonardo, Tiago Malls, TCE Logistic, Diverta, Flanco and Blue Air were just a few of the well-known local companies which were faced with insolvency issues. City Mall, for instance, has to pay back a EUR 40 million loan to UniCredit Tiriac Bank, while footwear retailer Leonardo has liabilities of EUR 95 million.

The number of insolvent companies increased dramatically in 2010. In H1 of this year it reached 11,221 firms, a 7.5 percent hike compared to same period in 2009, when there were 10,435 cases of insolvency.

Some 6,255 companies are involved in general insolvency procedures, about 2,235 are going through the simplified version, 14 are undergoing reorganization and 2,717 are heading for bankruptcy.

Nicolae Rusu, senior partner at Casa de InsolventaTransilvania (CTIR), told Business Review that from the firm’s experience most of the companies instigated insolvency proceedings at their own initiative because of the economic crisis.

“Debt accumulation, the reduction or loss of supplier credit, lack of liquidity, failure to obtain new financing and cash flow problems are some of the factors that see companies turn to insolvency,” said Rusu.

Statistics from the National Union of Insolvency Practitioners in Romania show that this year the percentage of companies that have applied to enter insolvency proceedings of all applications registered by the courts has soared compared to the previous year, from around 10 to 45 percent.

But insiders think the worst may now be over. For next year, market specialists are talking about a decrease in the number of insolvency cases that will come before the courts.

“We believe that insolvency cases will continue next year, but perhaps at lower levels. A comparative analysis of the first half of this year with the same period of 2009 reveals a downward trend in the rate of initiation of new insolvency proceedings. This decrease will continue in 2011,” said Rusu.

On a market in which financing solutions seem to be under lock and key, it remains to be seen what solutions companies will implement in order to keep their day-to-day operations going and the wolf from the door.

Romval Cluj-Napoca Field: metallic construction, manufacturing Value of fixed assets: RON 13.4 mln No. of employees: 150 Liabilities: RON 31.5 mln Procedure status: observation; the company plans to present a reorganization plan to pay all debts in the next 3 years

Telezimex Cluj-Napoca Field: telecommunication component seller Value of fixed assets: RON 7.6 mln No. of employees: 30 Liabilities: RON 6.95 mln Procedure status: observation; there has been new negotiations with retailers such as Kaufland, Dedeman and Sel Gros, new contracts with suppliers Sony and Phillips have been inked

DIRECT Pitesti Field: construction materials retailer Value of fixed assets: RON 116.1 mln No. of employees: 214 Liabilities: RON 85.3 mln Procedure status: reorganization

Leonardo Oradea Field: shoes and leather goods shops Value of fixed assets: RON 95 mln No. of employees: 1,692 Liabilities: RON 412,9 mln Procedure status: confirmed plan

CARTESIAN INVEST Floresti Field: real estate development Value of fixed assets: RON 34,4 mln No. of employees: 5 Liabilities: RON 25,9 mln Procedure status: reorganization plan approved by creditors

MEXXEM Cluj-Napoca Field: leather products seller (Stone Creek store chain) Value of fixed assets: RON 3,7 mln No. of employees: 199 Liabilities: RON 39,3 mln Procedure status: observation

DTH TELEVISION GRUP Bucuresti Field: satellite telecommunication Value of fixed assets: RON 79,2 mln No. of employees: 341 Liabilities: RON 407,7 mln Procedure status: observation

MLS PROIECT ORADEA (TIAGO MALL) Field: real estate development Value of fixed assets: RON 245,4 mln No. of employees: 0 Liabilities: RON 325,5 mln Procedure status: bankruptcy

PRO EXPRESS RETAIL (DIVERTA) Field: bookseller Value of fixed assets: RON 25,5 mln No. of employees: 556 Liabilities: RON 85,3 mln Procedure status: observation

RED PROJECT THREE Braila (ARMONIA MALL) Field: real estate development Value of fixed assets: RON 82 mln No. of employees: 0 Liabilities: Procedure status: observation

MEVA Drobeta Turnu Severin Field: wagon construction Value of fixed assets: RON 35.9 mln (accounting value) No. of employees: 515 Liabilities: Procedure status: observation Source: Casa de Insolventa Transilvania

www.business-review.ro Business Review | December 20 - 26, 2010

» continued from page 17 end of this year, the firm will have completed a total investment of EUR 200 million in its Craiova plant, about one third of the EUR 675 million promised in the privatization contract, initially by 2012, and now, thanks to the crisis, by 2013, when the company must reach a production of 300,000 units per year.

In the Craiova plant nearly 7,500 Ford Transit Connect vans were produced in the first ten months of this year, according to statistics from the Automotive Manufacturers and Importers Association (APIA), with over 99 percent being exported.

The company has bold plans for the future. The small class model Ford B-Max will enter production at the Craiova plant by the end of next year and its commercial launch will take place in 2012, announced Ford Romania officials recently. The company has already established a list of nearly 20 suppliers who will produce components for both the B-Max and the Transit Connect, a next generation light commercial model.

For 2011, the Romanian authorities have in their car market survival kit measures such as a higher car tax, a tax for EURO 5 vehicles and a repeat of the local version of the ”cash for clunkers” program. But is it enough?

Oil companies saw financial results burning this year In the oil production sector the two major companies, Petrom and Rompetrol, have had their share of burning problems this year. OMV Petrom posted EUR 27.6 million in losses in the third quarter of the year. The financial results reported by the company in Q3 2010 were burdened by a one-off charge 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 made progress on the power project at Brazi and entered partnerships with internationally reputed companies in order to maximize production on selected mature fields, with a cumulative production enhancement of 50 percent expected from the respective fields in the next five years," said Mariana Gheorghe, CEO of OMV Petrom.

The company’s reported EBIT of RON 336 million was 62 percent lower than in the same period of 2009, driven by the impairment of Kazakh assets based on the outcome of the technical assessment of the fields and the reestablishment of export customs duty in Kazakhstan, and also by higher depreciation, following significant investments made in the last 12 months.

According to company information, exploration and production (E&P) will continue to focus on larger, high-impact prospects located in deeper areas. A 3D seismic survey in the Moreni area is ongoing. The 3D seismic data acquired in the Neptun deepwater offshore area, explored in a joint venture with ExxonMobil, is currently being evaluated to identify prospects.

The focus is on a close-out of the gas de-bottlenecking project in Hurezani, and the further progress of seven ongoing integrated field re-development projects.

As a result of a recent technical assessment of its Kazakh activities, Petrom announced that the production forecast for

YEAR IN REVIEW 19 Komsomolskoe was being revised downwards to reflect the actual performance of the reservoir as well as its facilities.

Construction of the Brazi power plant, which is scheduled to start operations towards the end of 2011, continued. Moreover, Petrom is focusing on the construction of the wind power generation plant it acquired in Dobrogea, estimated to be finished in mid-2011. Through this project, the firm intends to capitalize on the flexibility of the Brazi gasfired power plant, benefiting from the strengths of both technologies.

Meanwhile, the Romanian Office for State Participations and Industry Privatization (OPSPI) initiated procedures to sell a 9.8 percent stake in Petrom on the stock exchange.

In a first step, the state institution made public its announcement that it would take on legal consultancy services through which to manage the selection of financial consultancy services for a second IPO for OMV Petrom.

According to state authority sources quoted by media reports, the share package listing is estimated to be finished by March next year.

Elsewhere, Rompetrol Rafinare (RRC), part of the Rompetrol Group, 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.

Rompetrol Rafinare also has serious issues with the Finance Ministry. The company paid EUR 54 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 on RRC’s EUR 570 million historical debt.

In line with the legal requirements 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,

YEAR in numbers

1bn euro is the sum expected to be netted by the Romanian state for its stake in Romtelecom

which became a shareholder in the firm, with a 44.7 percent stake of its total share capital.

The Romanian authorities contested the resolution and have initiated more than 20 law suits against Rompetrol. Yet, recently, during a visit to Kazakhstan, President Traian Basescu talked of extending the payment deadline by twothree years.

www.business-review.ro Business Review | September 6 - 12, 2010

20 CITY CHARITY

Courtesy of ProPatrimonioFoundation

If music be the food of love: young performers are lending their talents to help preserve Romania’s fine churches

Young musicians perform to save wooden churches Many times they feature interior paintings, sometimes exterior ones, and the religious scenes include valuable information on local life, tools and clothing used, social hierarchies,� says architect Serban Sturdza, the president of the ProPatrimonio foundation on the importance of saving these monuments.

The concerts are expected to take place once a month in Bucharest locations such as embassies and consulates, concert halls and cultural institutes and centers. Princess Marina Sturdza, the culture minister Toader Paleologu, historian Neagu Djuvara and Petre Guran, the director of the Romanian Cultural Institute in Chisinau, are among the supporters of the project.

The chamber-music series of concerts project is part of the 60 Churches project started by the Romanian Architects Order, Dala Foundation and ProPatrimonio foundation two years ago.

Courtesy of ProPatrimonio Foundation

The ProPatrimonio foundation, SoNoRo association and the Order of Architects in Romania have kicked off a fund-raising program to support the refurbishment of wooden churches in Northern Oltenia and Transylvania.

It consists of a series of charity, chamber-music concerts, the proceeds of which will fund the necessary construction works to save the churches, many of which are facing collapse.

Following research conducted by Dala foundation and several architects, 60 churches in Northern Oltenia and Transylvania have been selected for inclusion.

Located in Gorj, Valcea, Hunedoara and Sibiu counties, they host architectural and decorative elements from the 17th-19th centuries. “Wooden churches are of smaller sizes and, together with the cemetery they are placed in, many times form a landscape ensemble that is representative for the community, and culturally valuable.

Slice of history: The churches boast features that date back to the 17th century

www.business-review.ro Business Review | December 20 - 26, 2010

CITY 21

FILM REVIEW

On your bike: what Tron: Legacy lacks in storyline it makes up for in visual panache, with astonishing 3D graphics

Tron: Legacy ∫ DEBBIE STOWE Directed by: Joseph Kosinski Starring: Jeff Bridges, Garrett Hedlund, Bruce Boxleitner, Olivia Wilde On at: Cinema City Cotroceni & Samsung Imax, Cinema City Sun Plaza, CinemaPro, Hollywood Multiplex, Movieplex Cinema, Patria, The Light Anyone under 40 or not into sci-fi may not be aware of the first Tron film, a preMatrix caper in which Jeff Bridges played

both computer hacker Kevin Flynn and his counterpart in a virtual reality world.

But enough back-story is given at the start to get viewers up to speed: basically Flynn disappeared mysteriously in the 1980s, leaving his young son Sam, who in the meantime has grown up to be a rebellious looker, and his software company, which the current greedy board are leading away from Flynn’s more public-spirited leanings.

After a boardroom prank, Sam ends up in the virtual reality world of his dad’s creation. But apart from every-

body wearing ultra-stylish black and white clothing (de rigeur in all virtual reality worlds thanks to Keanu and co), this is a place of repression, where hapless citizens are pitched against each other in violent gladiatorial battles. The overlord of all this brutality is Clu, Kevin Flynn’s alter-ego (a digitally remastered Jeff Bridges made to look 20 years younger), while Kevin himself lives in exile with a nubile young lady (a special computer program who is humankind’s great white hope). Can plucky Sam save his dad and the girl and stop Clu from carrying out his dastardly plan (the specifics of which escape me – probably something to do with world domination)?

There’s a dash of The Matrix, a hint of Minority Report, a pinch of Star Wars, some 2001: A Space Odyssey and the

plot’s been rolled out dozens of times before. The screenplay is not going to win an Oscar and there are no big ideas like those found in the films it references. But Tron: Legacy is not about thinking, it’s about seeing. The 3D graphics are simply phenomenal. As the characters zip around on motorbikes, flit between levels like a computer game, engage in aerial combat and fling strange Frisbee-like missiles at each other, the viewer is right in there at the heart of the action. Attention, talent and cash have clearly been lavished on the visuals, and though characterization and script would have perhaps benefitted from a little more of the same, the sheer visual feast should compensate for any such shortcomings.

editorial@business-review.ro

CONCERT

AWARDS

Depeche Mode’s Andy Fletcher to DJ in town

The Concert earns Golden Globe nod

One of the founding members of electrogoth band Depeche Mode, synth player Andy Fletcher, will bring his DJ set to Bucharest on January 29.

Although being part of Depeche Mode is a full-time job, Fletcher (or “Fletch” as fans refer to him) has recorded an album with band-mate Alan Wilder.

Martin Gore, another Depeche Mode founding member, has set up a record label, Toast Hawaii, and played DJ sets in locations across the world.

Romanian-born director Radu Mihaileanu’s comedy drama The Concert has been nominated in the Best Foreign Film category of the 68th Golden Globes. The movie tells the story of Andrei Filipov, the director of the Balshoy Theater orchestra, who was fired for refusing to dispense with his Jewish musicians. It was shot in Romania, Moscow and Paris. Mihaileanu left Romania in 1980, and graduated from the IDHEC cinematographic institute in Paris.

Staff

Fletcher’s style may best be described as “bedroom DJ” and includes new wave mixes, electro tracks as well as Depeche Mode and Mute Records hits.

The artist came to Romania in 2006 with the rest of the band, as part of the Touring the Angel Tour.

The concert on January 29 will be held at The Ark Underground, on Uranus Str. 150, the former Calea Rahovei 196A. Tickets cost RON 50. It is supported by Emagic.

Staff

The film was shoot in Romania, Russia and France

www.business-review.ro Business Review | December 20 - 26, 2010

22 IN TOUCH

QUOTES of the week

ROMANIA IN THE INTERNATIONAL PRESS

A perfect year “Santa gave me a perfect year,” President Traian Basescu told journalists. He wishes Romanians “strength” in 2011. The president made his comments in a press conference reviewing a difficult political year.

Otilia Haraga Senior Journalist is writing an article on e-commerce websites offering discounts and how popular they are during this period of turmoil. The downturn has sharpened competition on this market, especially after the entrance of several big names.

Where’s the justice in that?

“No justice system in the EU has done so much harm to a country as the Romanian one. They did it because they did not care, because they played God, and out of contempt for Romanians’ best interests,” said Basescu.

otilia.haraga@business-review.ro

Simona Bazavan Journalist

Accusations that Romania did not take ment to give us the necessary technical tough measures in 2009 are right, adassistance, without giving us money, in mitted President Traian Basescu in an inorder to speed up the process of EU interview with London’s Financial Times. tegration, which should steer us towards “Reality came in 2010,” he said. a more rapid absorption of funds,” said Basescu.

The explanation he gave was that 2009 was a year of presidential elections.

The president also opposed the draft Also, the ruling party was in alliance bill changing the name of ‘Rroma’ to with the Socialist Party and the differ- ‘gypsy’ on the grounds that this would be ences in approach between the centercowardly. right party and the socialists were im“We take responsibility for this mipossible to negotiate. nority, we are trying to do what we must,” If the budget and salary law are apsaid Basescu. proved by Parliament, Romania will conBasescu also expressed his support for solidate its economic position and will no the adoption of the new Education Law, longer run the risk of decline, except in as the Romanian education system is the event of exceptional global deterio- “massively losing value.” ration. VAT can only grow by at most 1 He spoke in favor of the revision of the percent, said the president.

Labor Code, which he said lacks flexibil“I would opt for closing a precautionity in its current form. The state will ary agreement with the IMF, the World continue its policy of axing social and laBank and the EU. We want an agreebor force expenses, added the president.

An iPad for every Romanian “I have bought, like the average Romanian, an iPad,” announced Prime Minister Emil Boc. In Romania, an iPad costs RON 2,500 (16 GB) or RON 3,500 (64 GB).

The prime minister uses the device at the press conferences he gives and when in Parliament.

EVENTS, BUSINESS & POLITICAL AGENDA December 20, 2010 11:30 The centralized version of the Unitary Integrated Information System will be officially launched at the headquarters of the National Health Insurance House.

By invitation only.

December 2, 2010 Recolamp organizes a Christmas party at Funland Unirea. By invitation only.

Courtesy of Gov.ro

iFan: Prime Minister Emil Boc

ISSN No. 1453 - 729X

WHAT WE ARE WORKING ON

December 22, 2010 11:00 The Ministry of the Economy launches the National Network of Fe-

male Entrepreneurship Ambassadors project at 11, Poterasi St. 12:00 IBM Romania organizes the ''Smart Clouds for Smarter Businesses” press lunch at the Four Seasons Restaurant. By invitation only.

February 10, 2011 Business Review organizes the Romanian Tax, Law & Lobby event at Howard Johnson Grand Plaza. For information about registration and future BR events, please visit http://business-review.ro/events

is preparing a cover story on how the local labor market evolved in 2010 and what trends are shaping up in this sector for next year. The economic recession brought layoffs and lower wages for many employees, but with considerable differences between industries. simona.bazavan@business-review.ro

Dana Verdes Senior Journalist is following the Property Fund’s journey towards the Bucharest Stock Exchange and will write an article on the listing of the fund by administrator Franklin Templeton estimated to occur towards the end of the first month of 2011. dana.verdes@business-review.ro

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FOUNDING EDITOR Bill Avery EDITOR-IN-CHIEF Simona Fodor SENIOR JOURNALISTS Otilia Haraga, Dana Verdes JOURNALISTS Simona Bazavan, Corina Dumitrescu COPY EDITOR Debbie Stowe COLLABORATORS Anca Ionescu, Michael Barclay PHOTOGRAPHER Laurentiu Obae LAYOUT Beatrice Gheorghiu

EXECUTIVE DIRECTOR George Moise SALES & EVENTS DIRECTOR Oana Molodoi MARKETING MANAGER Adina Milea SALES & EVENTS Ana-Maria Nedelcu, Claudia Munteanu RESEARCH & SUBSCRIPTION Lili Voineag PRODUCTION Dan Mitroi DISTRIBUTION Eugen Musat

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