PETROM TAKES OUT EUR 300 MLN UNSECURED LOAN FROM EBRD TO FUEL INVESTMENTS; SEE PAGE 5 NEWS
Richard Moat has left the helm of Orange Romania and the France Telecom Group as a whole, citing personal reasons See page 4
ANALYSIS
Utility company, bank and SIF shareholders are enjoying higher dividends this year, compensating for their losses on the Bucharest Stock Exchange See pages 10-11
ANALYSIS
Lenders and cell phone networks are pushing mobile banking services in 2009, with the market having welcomed its first specialized player See page 15
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See page 12
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3
NEWS
Richard Moat leaves Orange Romania
POSTA ROMANA TO DELIVER GENERAL PURPOSE PREPAID PAYMENT CARD é Romanian postal service Posta Romana and Advanced Payment Solutions Ltd (APS), a leading European provider of prepaid cards, have partnered to launch the country’s first-ever general purpose prepaid payment card. The card will be offered initially to Posta Romana staff ahead of the consumer launch in six Bucharest-based branches in the second quarter 2009, and will be rolled out to all 7,000 branches in due course.
Richard Moat, CEO of Orange Romania, has decided to leave the company for personal reasons. Until a new CEO is elected, Thierry Millet, the mobile network’s current commercial manager, will be interim CEO. Moat is leaving the company before the end of his mandate, which was extended in 2008 for another two years. “Richard Moat has decided to leave Orange Romania and the Orange-France Telecom group. After a series of international missions in Europe and Asia, Richard will go back to his home country, Great Britain,” said representatives of the company. Moat has been part of the Orange team for 17 years. Since taking on the position of CEO of Orange Romania in September 2004, he increased the company revenues from EUR 624 million to EUR 1.31 billion in 2008,
INSURER CLAL TO SELL LOCAL COMPANY BECAUSE OF CRISIS é Israeli insurance company Clal, present in Romania since 2006, is in talks with an investment group to sell its Romanian subsidiary in the second quarter of 2009, a move prompted by local results and the need to optimize resources, according to company representatives. The firm said the local development of the insurance company was a greenfield investment requiring constant capital input from the group, and that due to the general economic background it could not be certain of recouping its investment in the local subsidiary. An article in the last issue of Business Review mis-stated Valeriu Binig's current position – he is the financial advisory services director with Deloitte in Romania.
4
Richard Moat also leaves France Telecom Group
and consolidated its position of market leader. Over the coming period, Millet will completely take over CEO duties.
“The commercial and management team built by Thierry Millet over his three years of activity at Orange Romania will ensure the continuity of the business and will pursue the company’s priorities over the next period,” added company representatives. Millet has been commercial manager of Orange Romania since October 2005 and led the client service, marketing and sales departments. He has 20 years of experience at OrangeFrance Telecom and has worked in several top positions internationally. Orange Romania is the largest telecom player on the market with almost 10.4 million customers. At the end of December 2008, it had revenues of EUR 1.31 billion, a 6.2 percent increase compared to the revenues it posted at the end of 2007. Otilia Haraga
BCR borrows EUR 100 mln from EBRD to support SME lending The European Bank for Reconstruction and Development (EBRD) will lend EUR 100 million to local bank BCR in order to boost smallbusiness lending for companies with turnovers below EUR 50 million. The BCR is also in discussions with other international financial institutions over additional ways to support its lending to the real economy, particularly to the SME sector. The EBRD credit line is dedicated to financing companies with a maximum of 249 employees, turnover of up to EUR 50 million and balance sheet of maximum EUR 43 million. Individual sub-loans in the framework of this credit line will be for no more that EUR 1.5 million. “The EBRD has a long history of working with the BCR. This loan is an important step in continuing lending to the private SME sector in Romania. Also, it is part of our crisis response
LAURENTIU OBAE
EIB TALKS TO NINE LOCAL BANKS ABOUT SME FINANCING é European Investment Bank (EIB) has said it is in talks with eight or nine banks operating in Romania for granting financing to SMEs, and said it could sign contracts with six of them by May. Bank representatives have announced they plan this year to enlarge the already exiting financing program of EUR 500 million for SMEs. The loans will be granted equally by the EIB and the intermediary bank in Romania. The cost of these loans is estimated to be lower than market rate, according to EIB representatives.
LAURENTIU OBAE
BRIEFS
The lending targets companies with turnovers of less than EUR 50 million
and co-ordinated efforts with the other IFIs to stimulate the Romanian economy in these exceptional global circumstances,” said Varel Freeman, first vice-president of the EBRD. The bank will increase its investments in the country by an additional
EUR 500 million to EUR 1 billion over the next two years as part of an international EUR 20 billion financial support package. Approximately half of this sum will be dedicated to the financial sector, and the rest invested across the broader economy, including in the corporate, energy and energy efficiency and national and municipal infrastructure sectors. As a direct reaction to the global crisis, the EBRD has announced a significant increase in its overall investments in 2009 to EUR 7 billion. The BCR transaction comes in the context of the Joint International Financial Institutions (IFI) Action Plan, under which the EBRD joined forces with the World Bank Group and the European Investment Bank with the aim of investing a total of EUR 24.5 billion in SMEs via the banking sectors in Eastern Europe over the next two years. Staff
Siemens Romania takes over Forte Business Services Forte Business Services, the former subsidiary of Siemens IT Solutions and Services, has become Siemens’s eighth division through an absorption procedure, in line with the company’s global strategy. The “Forte – a Siemens company” brand is being replaced by the Siemens brand, according to a statement from the firm.
The new division will be managed by the former management of Forte, Mihai Gherman as division manager and Bernd Spreter, commercial director for this division. At the beginning of last year, the German group's Romanian subsidiary Siemens SRL announced plans to absorb Cluj-Napoca-based electrical equipment firm Frosys,
after acquiring it in 2007. After the takeover, the subscribed capital of the resulting company will be controlled by Siemens Aktiengesellschaft Osterreich, with a stake of 98.72 percent. Siemens estimates a business value of EUR 54 million in 2007, while Frosys attained EUR 5.8 million in the same year. Magda Purice BUSINESS REVIEW / April 6 - 12, 2009
NEWS
Petrom takes out EUR 300 million unsecured loan from the EBRD Petrom, one of the main oil and gas producers in South-East Europe, has taken out a corporate senior unsecured loan of up to EUR 300 million from the European Bank for Reconstruction and Development (EBRD). According to company officials, the EBRD financing will support a series of projects that include pollution clean-up, the replacement of outdated pipelines, health and safety measures and moves to increase energy efficiency. “The EBRD loan is crucial to our ability to push forward the group strategy of raising environmental standards and increasing our energy efficiency and competitiveness,” said Mariana Gheorghe, Petrom’s CEO. The EBRD is providing up to EUR 150 million of the overall credit, with the remainder to be syndicated to a group of commercial banks. It may include a parallel loan to be provided by Black Sea Trade and Development Bank. The EUR
150 million loan from the EBRD matures in seven years, while the syndicated loan, the difference up to EUR 300 million, matures in five. The loan from the EBRD is part of a larger financing program agreed in June last year. Under this program, in October, 2008, Petrom obtained a medium-term credit facility of EUR 375 million, and benefits from the support of its majority stakeholder, OMV, for financing and achieving the company’s development objectives. Company data show that, from the moment of privatization until the present, Petrom has invested some EUR 4 billion in modernization and improving company performance. Petrom has an annual refining capacity of 8 million tons and holds around 550 filling stations in Romania. Last year, its turnover was EUR 4.5 billion, while its EBITDA stood at EUR 969 million. OMV, the leading oil and gas group in Central Europe, holds a 51.01 percent stake in Petrom. Dana Ciuraru
BNR changes structure of mandatory reserves to free up liquidity, maintains interest rate The Romanian Central Bank (BNR) has decided to drop the minimum level of mandatory reserves for foreign currency passives with a residual expiration greater than two years from 40 percent to zero. This is a component in the calculation of minimum mandatory reserves (RMO), which was however kept at 18 percent for passives in local currency, and 40 percent for foreign currency, both with an expiration below two years. The decision will be applicable from May 24, when Romania could also make its first withdrawal, of some EUR 5 billion, from its IMF loan. The loan could counter-balance the drop in reserves triggered by the recent decision. The move may allow banks to increase their liquidity and unfreeze lending if they can attract long-term financing, with a minimum two-year expiration. It could also prompt them to switch short-term financing to the longer term. Although players were also expecting a cut in the interest rate, the BNR kept it at 10 percent. Recently, the bank made changes to the structure of provisions, allowing banks to deduct 25 percent of the value of guarantees for a loan BUSINESS REVIEW / April 6 - 12, 2009
from the provisions set for it. Previously, they had to create provisions for loans with more than 90 days’ delay in payments but could not deduct the value of the guarantees from these provisions. Bankers expected the move, as BNR governor Mugur Isarescu had previously said the IMF loan agreement would allow the bank to gradually decrease the mandatory reserves for foreign currency. In October last year, the BNR decided to decrease the level of RMO in local currency from 20 to 18 percent, but, according to Isarescu, it turned out to be a mistake, as banks changed the freed sums into euro and did not lend them. The BNR and IMF recently received pledges from the shareholders of nine banks active in Romania that they will continue lending in the country, support their local subsidiaries and increase their capital, if necessary. Erste Bank, Raiffeisen, Eurobank, National Bank of Greece, UniCredit, Societe Generale, Alpha Bank Volksbank and Piraeus signed a letter to pledge support for the local economy, in view of the pending EUR 20 billion loan from several IFIs. Corina Saceanu 5
NEWS
Heineken Romania sees turnover rise 20 percent in 2008
BURGER KING OPENS EIGHTH ROMANIAN UNIT é Fast-food chain Burger King, operated by Atlantic Restaurant System, has opened its eighth outlet in Romania in the Bucharest Mall, in the Vitan area of the capital, the company has said. The location covers 110 sqm. At the end of 2008, the company announced it planned to open fast food units outside Bucharest, one of the targeted cities being Constanta.
The Romanian subsidiary of Dutch brewer Heineken has announced a 20 percent increase in its turnover in 2008. From April, the firm will have a new CEO, Dutchman Jan Derck van Karnebeek. The term of current president and CEO, Edwin Botterman, will finish at the end of March. Botterman will next take up the post of general manager of Heineken’s operations in Italy. The brewer holds 26 percent of the local market. It has over 1,300 employees and has opened production units in Romania in five cities: Constanta, Miercurea Ciuc, Hateg, Targu Mures and Craiova. In total, the company has invested over EUR 165 million in the production units. Brands in the Heineken portfolio are Heineken, Zipfer, Gosser, Schlossgold, Silva,
OMV SELLS MOL STAKE TO RUSSIAN COMPANY SURGUTNEFTEGAS é Austrian oil and gas company OMV has sold its 21.2 percent share package in Hungarian oil company MOL to Russian firm Surgutneftegas for EUR 1.4 billion, according to OMV officials. OMV commented that the sale of its interest in MOL was “a logical step” in the wake of the end of its efforts to take over the Hungarian oil and gas producer in August last year, because of MOL’s resistance to being acquired and restrictive takeover conditions imposed by the European Union. MEDICAL CENTER UNIREA PUTS EUR 400,000 INTO NEW CLINIC é Medical Center Unirea (CMU) has said that it has invested around EUR 400,000 in opening a specialized clinic in Bucharest. The new clinic, which will provide labor services, is located in the Iride-Pipera area. The company expects to carry out between 15,000 and 25,000 consultations and check-ups in the 110-sqm clinic. CMU opened its first clinic in the Iride area in 2005, and decided to expand its local investments due to the increasing potential from companies operating in Iride business park. AEGON ESTIMATES EUR 20 MLN LOCAL INVESTMENT é Dutch insurer Aegon estimates it has invested around EUR 20 million on the local insurance market so far. Company representatives voiced their commitment to investing further, depending on the evolution of the local insurance market. The insurer estimated a 0.37 percent access rate for life insurance products locally, compared with 1.2 percent in Poland and 1.1 percent in Hungary. 6
COURTESY OF HEINEKEN
BRIEFS
The brewer holds 26 percent of the local market
Ciuc Premium, Golden Brau, Neumarkt, Bucegi, Gambrinus, Harghita and Hategana. The firm’s Central and Eastern European revenues grew last
year by 14 percent, to EUR 3.6 billion, according to the company. Recently, the Romanian Brewers’ Association, which comprises Heineken Romania, InBev Romania, Romaqua Group, United Romanian Breweries Bereprod and URSUS Breweries, announced a total of EUR 200 million investment had been made by these companies locally in 2008. Overall, these brewers have invested around EUR 950 million on the local market. For the last year, the association estimated a 4.1 percent growth on the beer market. “In 2008, the beer market increased and Romanian ranked among the top 10 European consumers. For 2009, we estimate increasing beer sales but at a lower pace,” said Shachar Shaine, president of the association. Magda Purice
Local legal eagles fly Length of trials and lack of consistency in practice, main flaws of Romanian justice system high in int’l ranking The number of lawyers working for private law firms who would like to become judges has been diminishing due to the admission procedure to the public system, the exam organized by the National Institute of Magistrates (INM), says a top politician. “Now admission is possible only after an exam. In the past it used to be done based on an interview and an application file evaluation. Maybe this is too radical, because there are many experienced lawyers who would like to become judges but don't want to go through exams, lawyers who feel they are experienced enough to become judges,” Rodica Constantinovici, secretary of state with the Ministry of Justice, tells Business Review. Previously, admission was easier in order to counterbalance lawyers' tendency to migrate to private firms, which payed better, she explains. “The lack of a rigorous admission system in the past was however reflected in the quality of the justice,” says Constantinovici. The small number of judges may be one reason for the length of trials in many cases, which lies behind the public’s lack of trust in the Romanian justice system. The high number of cases to solve is an impediment for judges
too, says Constantinovici, who was a judge herself in the 90s. The new civil and penal codes and their procedures, which are debated in special commissions in the Chamber of Deputies, aim to solve two of the main weaknesses of the Romanian justice, the length of cases and lack of consistence in legal practice, Constantinovici explains. “It happens in Romania that in similar cases, the outcomes are different, not only when decided by different judges, but by the same judge too,” the secretary of state explains. She expects the four debated codes, which have provoked discussion in the media recently, to be adopted by this summer, while their enforcement should come one year after adoption in case of the penal code, as the judges need a learning period. “There have been several criticisms about these codes, mostly related to patrimonial rights, and comments on changes in family rights, among others. It is normal to get a reaction from the public. We need feedback, and the reform is so profound that it would be unnatural not to have a reaction at all,” says Constantinovici, the ministry's representative in the commission debating the civil codes. Corina Saceanu
Several local law firms feature in the top tier of the international title Legal 500 for 2009. Nestor, Nestor Diculescu Kingston Petersen (NNDKP) ranks in the top band in all eight categories, Musat & Asociatii in five, and Tuca, Zbarcea & Asociatii three. Badea Clifford Chance, CMS Cameron McKenna and Popovici, Nitu & Asociatii were each ranked in band one in two categories. Badea Clifford Chance and CMS Cameron McKenna were in the first band of the banking, finance & capital market section, while Musat & Asociatii, NNDKP and Tuca Zbarcea & Asociatii, made it for corporate and M&A. In dispute resolution, top ranking went to NNDKP, Tuca Zbarcea & Asociatii and Zamfirescu, Racoti Predoiu. The energy and natural resources segment is led by CMS Cameron McKenna, Gide Loyrette Nouel, Musat & Asociatii and NNDKP. The IT, telecom and media segment's top rating went to Musat & Asociatii, NNDKP, Popovici, Nitu & Asociatii and Tuca Zbarcea & Asociatii. The privatization & PPP top spot is shared by Musat & Asociatii and NNDKP, and project finance by NNDKP and Popovici, Nitu & Asociatii. The real estate and construction section ranks Bandea Clifford Chance, Musat & Asociatii, NNDKP, Popovici, Nitu & Asociatii and Salans in the top band. Corina Saceanu BUSINESS REVIEW / April 6 - 12, 2009
CALENDAR / WHO’S NEWS
EVENTS, BUSINESS AND POLITICAL AGENDA APRIL 6 é 09.00 – Romanian Chamber of Commerce and Industry organizes Ro-
manian-Jordanian Forum at its headquarters on the occasion of the visit of King Abdullah II of Jordan. é 09.30 – Bucharest Stock Exchange opens transaction session in the
presence of Jalil Tarif, CEO of the Amman Stock Exchange, at IBC Modern building, the Millennium room.
APRIL 7 é 18.30 – CEU Business School organizes master class on “The Global
Economic Crisis: Can Central and Eastern European Managers Cope?” at JW Marriott Bucharest Grand Hotel in Galati conference room. The
WHO’S ADRIAN VASCU has recently joined KPMG in Romania as a valuation services director. He will coordinate the firm’s valuation department at a national level, as well as heading up the Cluj office. Vascu has more than 14 years’ experience in valuation services. At present, he is the president of ANEVAR (National Association of Romanian Valuers) and also a member of the Board of TEGOVA (European Group of Valuers' Association).
master class will be led by Prof Yusaf Akbar, MBA Programs Director at the school.
APRIL 8 é Microsoft organizes online seminar “getVIRTUALnow”.
APRIL 9-11 é Eurofinantari, a consultancy company in the development of projects
for European Financing, organizes workshop on “Drafting projects regarding HR development through POS DRU financing”.
AmCham gets new board of directors
COURTESY OF AMCHAM
AmCham Romania has more than 300 member companies
Sorin Mindrutescu, country leader of Oracle Romania, has been elected the new president of the American Chamber of Commerce in Romania (AmCham). Mindrutescu has been country leader of Oracle since February 2008 and was a member of the AmCham board during the previous mandate. “We are aware that in the current economic context, we have a challenging mandate ahead of us, but at BUSINESS REVIEW / April 6 - 12, 2009
the same time this makes AmCham even more valuable to its affiliates,” said the businessman. Additionally, the Amcham members elected a new board of directors during their annual general meeting on March 26. The new line-up consists of Anda Todor, vice-president of Salans; Cristian Colteanu, vice-president of GE; Shahmir Khaliq, treasurer of Citibank Europe plc; Bill Bowman deputy senior partner in KPMG; Radu Enache, CEO of HP; Manuela Nestor, managing partner in NNDKP; Marius Persinariu, CEO of Xerox; Ionut Simion, tax partner at PricewaterhouseCoopers; Calin Tatomir, general manager of Microsoft Romania; and Mihai Tudor, general manager of IBM Romania, as board members. AmCham Romania now has more than 300 members – American, international and local businesses, representing investments above USD 10 billion. Otilia Haraga
F LORIN B ANATEANU has recently joined KPMG in Romania as a director in the EU and public sector advisory department. Before joining KPMG, he worked as a project director in the UN's global development network, the United Nations Development Programme (UNDP). In his new role he will advise both private companies and state institutions on accessing and administering financing. He will also give guidance on the formation of strategic partnerships between the public and private sectors. REGIS MOUGEL, general manager of Auchan hypermarkets in Romania, has stepped down from this position. Previously, he was also general manager of Cora. Mougel said he would stay in Romania but would work in another field. PATRICK ESPASA was appointed general manager of Auchan hypermarkets in Romania. He will replace Regis Mougel who has stepped down from the position. Espasa previously worked for Auchan Italy for ten years. MIHAI ALEXE, 39, has joined DPD (Pegasus Courier SA) Romania as sales representative. He has wide experience in sales in sectors such as services, retail, real estate, cos-
NEWS metics and pharma. Mihai graduated in Electronics and Gravel Technique in 1987 and is fluent in English. CORIN CHIRIAC was appointed senior strategic planner at Senior Interactive. He has seven years of experience in communication and a solid background in branding that he acquired while working for Grapefruit. Previously, he was strategy director in DDB Bucharest and before that he was PR officer at Iulius Group. He graduated from the Gheorghe Asachi Technical Faculty in Iasi, the Faculty of Computers. RADU GLONT was appointed account director at Senior Interactive where he will be responsible for clients such as Renault, Heineken, Wrigley and Alexandrion. He has worked for five years at agencies such as Tempo Advertising and DDB Bucharest as account director. Glont is a graduate of the Academy of Economic Studies. PATRICIA ARBANAS was appointed account manager at Senior Interactive. Over the last three years, she has worked for Scala JWT and DDB Bucharest. She graduated from the Marketing Faculty of the University of Bucharest and is currently attending master’s classes at the National School of Political and Administrative Studies. VERONICA CIACOVEANU was appointed junior account manager at Senior Interactive. Over the last two years she has worked for Lowe & Partners. She graduated from the Faculty of Law and is pursuing master’s studies at the National School of Political and Administrative Studies, with a specialization in Management and Business Communication.
Business Review welcomes information for Who’s News from readers. Feel free to contact us on 206 0680 (10 lines), by fax at 335 3474 or e-mail: otilia.haraga@bmg.ro
7
ANALYSIS
Romania considers public pension system overhaul The recent International Monetary Fund call for public pension reform in Romania could trigger changes in a system which has come under pressure from a worsening demographic outlook. Actual measures have yet to be decided, but the first steps have been made with the introduction of a social pension, a frozen contribution ratio for mandatory private pensions and a mooted increase in the retirement age. Private pension funds say that, instead of patching up the public system, the government should focus on strengthening the private component. By Corina Saceanu
8
STOCKEXCHANGE
Each Romanian employee who pays their social contribution tax covers the monthly payments to just one pensioner nowadays. This has put greater pressure on the system, as at the beginning of the 90s, the same sum was met by three taxpayers. By 2050, four taxpayers will cover the payouts to 10 pensioners, a ratio of 0.4 to 1, according to estimates by the Romanian Pension Funds' Association (APAPR). The local public pension system is suffering from a falling number of taxpayers, an rising number of pensioners and an unfavorable demographic evolution, which calls for change. Reforming the Romanian state pension system was one of the requests made by the International Monetary Fund, when it pledged a EUR 12.95 billion loan for the country. On the long term, the cur-
rent pay-as-you-go system, which takes contributions from taxpayers and distributes them immediately as pensions, may prove unsustainable due to demographics. At the beginning of the 90s, 8.2 million taxpayers were funding the payouts to 2.5 million pensioners in Romania. But 18 years later, just 4.9 million taxpayers support the pensions of 4.7 million retirees. Official European Union estimates that the Romanian population will fall by a further 4.5 million by 2060 paint an even bleaker picture. Half a century from now, Romania is likely to be one of the European countries coming under the highest demographic pressure. On a shorter term, the World Bank (WB) estimates a drop in population of 2.3 million by 2025, and an increase in the ratio of Romanians over 65 years old. This means an aging population will be more dependent on a decreasing number of workers to cover their monthly
An age old problem: A falling number of taxpayers support a growing number of pensioners
BUSINESS REVIEW / April 6 - 12, 2009
ANALYSIS
LAURENTIU OBAE
Crinu Andanut, president of APAPR and head of Allianz Tiriac Private Pension in Romania
pensions. Romania is not alone – populations are aging across European states. But the difference lies in the type of pension system each country has adopted. In Western Europe, retirement payments come largely from private occupational pensions, which are offered and administrated by employers. Eastern Europe, on the other hand, relies on pay-as-you-go public systems, with most of the countries having introduced private pension pillars to consolidate those systems. Romania did so in 2007, and now allows mandatory private schemes as well as optional private pensions.
CONSOLIDATION
MEASURES MERELY PROLONG AGONY OF PUBLIC SYSTEM, SAY PRIVATE FUNDS
Increasing the retirement age, as suggested by the World Bank, from the current 58 for women and 63 for men, to more than 70 years old by 2050 should consolidate the public pension budget. In 2007, Romanians' life expectancy was 75 for women and 68 for men, a rise since the beginning of the 90s, according
BUSINESS REVIEW / April 6 - 12, 2009
to the National Institute of Statistics. “This is not a reinvention of the wheel. On the contrary, other states have been trying surrogate solutions for years to prolong the agony of the public system pillar,” Crinu Andanut, president of the APAPR and also head of Allianz Tiriac Private Pension fund, tells Business Review. Upping the retirement age would allow for a re-balance in the public pension system, which is likely to see high imbalances in the future, according to the WB. The deficit in the pension system in Romania will exceed five percent of the GDP in 2020, further increase and then drop to 6.2 percent of the GDP in 2050, according to a WB report. Other potential measures include an increase in contributions to the public system, plus limits on early retirement and other benefits. “But these are only meant to patch up the system, not to offer lasting solutions. The only lasting solution is a strong Pillar II,” says Andanut. In Romania, Pillar II of the pen-
sion system consists of a sum paid to the public system, which is redirected to privately administered pensions funds. Last year, two percent of total social security contributions went to Pillar II funds, and the Romanian government has frozen the ratio for this year, although it had initially agreed to increase the figure by 0.5 percent each year, to a final 6 percent. The move has caused discontent among private pension administration companies, which said it would cut up to EUR 80 million from the total amount which was supposed to enter the pension accounts of 4.6 million contributors to Pillar II. It will also affect the private pension administrators on the Romanian market, companies which have invested EUR 500 million in the country so far. The need to limit early retirement could be prompted by the increasing numbers of people leaving the workforce early, numbers which usually increase in tough economic periods, becoming an alternative to unemployment. While pension system reform is expected, the government has decided to create a minimum guaranteed pension of RON 300 from this
month, which will increase to RON 350 in October this year. The measure will cost EUR 200 million, which will come from the state budget. “We don't know whether the authorities will choose to limit early retirement, cease to link pensions to the average salary and use only an annual index of the inflation rate, or increase the retirement age – this is a public policy measure. But we know for sure that a strong Pillar II needs to be built, to allow decent revenues for today's contributors when they retire, as they currently stand no chance of decent pensions from the public system in 20 or 30 years,” explains Crinu Andanut. In two or three decades, the public pension will become symbolic – similar to state aid – and not sufficient to live on, he goes on. The high contributions to the public system – 31 percent of the gross revenue – are not matched by high pensions, pundits believe. “Out of the 4.7 million pensioners in the public system, over three million have a pension below EUR 175 a month. And this is the case after the average state pension has tripled in the last five years due to election campaigns,” says Andanut. corina_saceanu@bmg.ro
Private pensions in numbers é The local private pensions market is the only one in the region to have
posted a positive yield last year, the rest of the markets having posted negative results on the decline of financial markets, according to the APAPR. In Romania, private pension funds posted an average yield of 11 percent last year, compared to a loss of 22.5 percent in Hungary, 20.8 percent in Bulgaria and 14.2 percent in Poland. é Private pension funds active in Romania started to collect money from contributors and make investments in May last year. At the end of February this year, 58 percent of their assets were state titles, and 11 percent in bank deposits.
9
ANALYSIS By Dana Ciuraru
MEDIAFAX
Some of those who lost money on stock market transactions can at least enjoy higher dividends
Utility, bank and SIF shareholders celebrate dividend payouts The falls in share prices on the BSE of late have taken dividend yields to their highest in recent years. Investors who bet on utility companies like Transgaz and Transelectrica, banks and financial investment companies (SIFs) are reaping the rewards. Meanwhile, oil, pharma and real estate firms, such as Petrom, Zentiva and Biofarm, are not paying out any dividends for last year. 10
Dividends are not a popular topic these days on the stock exchange – at least for those investors who put their money into oil, pharmaceutical or real estate companies, erstwhile sources of big profits. “Dividends are down from previous years, because of low net profits and companies’ decision to keep liquidities within firms,” Marius Pandele, head of research at brokerage company Tradeville, told Business Review. Different factors affect a firm’s decision whether to pay out dividends to shareholders or not – and some have recently changed tack. Pandele says that on the one hand, some issuers on the Bucharest Stock Exchange (BSE) now prefer to allot dividends, having distributed free shares in past years, which have lost their shine for shareholders. Banca Transilvania is a case in point. On the other hand, some companies listed on the BSE have paid out dividends every year, but have now decided to keep the money within the company to help them through the economic crisis. Petrom and other heavy industry companies have taken this option. Others have been ploughing the profits back in for some time. “In the past three years, the company’s profit was reinvested and no dividends were given,” said Cristina Suteu, head of the PR department at Dafora.
HIGHER
YIELDS FOR
2008
Capital market analysts say that a lower absolute value of dividends does not mean a decrease in yield as well. On the contrary, the falls in share prices have made dividend yields the highest in recent years. This side effect has brought about significant stock appreciation in the past few weeks, with many investors getting very excited about the chance to achieve a gross profit of 10 to 15 percent of their investments in little more than a month, especially at such a gloomy economic time. Andreea Gheorghe, analysis department manager at SSIF Intercapital Invest, told BR, “While for 2007 about 20 listed companies approved dividends at an average of 3.45 percent, last year, the average dividend – based on the sums paid by 19 companies – is around 7 percent, as the capital market has undergone a
substantial increase over the past three months.” She added: “The increase is mainly determined by the constant falls in share prices compared to last year. Some companies have even been registering a drop in the absolute value of gross dividends, for instance the five financial investment companies (SIFs). This year, dividends could reach as much as 16 percent, as in the case of Alumil Rom Industry and Alro Slatina, or about 13 percent at Santierul Naval Orsova.”
UTILITIES FIRMS, BANKS SIFS PAY OUT BIG...
AND
The utilities sector is in a good position regarding dividends, with both listed companies, Transelectrica and Transgaz, deciding to reward shareholders this way. Transgaz has a better dividend yield, of about 8 percent taking into account the March 31 share price (RON 10.47 per share – with the dividend proposed at a quotation of RON 115). “Transelectrica owes this to the euro, dollar and Japanese yen loans contracted, as the devaluation of the national currency substantially cut last year’s net profit. The dividend yield in this case is a bit over 3 percent, with a proposed gross dividend of only RON 0.3 per share,” said Pandele. SIF investors are also set to reap rewards. Four out of the five SIFs intend to distribute dividends of between 6.1 percent for SIF Banat Crisana and 10.5 percent at SIF Transilvania and SIF Moldova. In SIF Muntenia’s case, the share price increases recorded recently led to a dividend yield of about 8.3 percent. But SIF Oltenia will not allot dividends. “The banking domain will also bring investors good yields. Three of the four listed banks have decided to pay dividends from last year’s profit. The dividend yield will be 5.2 percent for Erste Bank, 5.9 percent for Banca Transilvania and 11.4 percent for BRD, at the share price of March 31,” said Tradeville’s Pandele. He added that surprise news had come from Alro Slatina: the company decided to allocate 84 percent of last year’s net profit to granting dividends. At the time of the announcement, the yield reached over 20 percent of the market share price. Subsequently, though, it has recorded a slight fall as a result of a share price increase. BUSINESS REVIEW / April 6 - 12, 2009
ANALYSIS ... BUT NO DIVIDENDS FROM OIL, PHARMACEUTICAL AND REAL ESTATE FIRMS
BUSINESS REVIEW / April 6 - 12, 2009
BSE dividend payouts Company / Symbol
Net dividend 2008(*) RON/share ALRO (ALR) 0.2415 Alumil (ALU) 0.2436 Aerostar (ARS) 0.0395 Antibiotice (ATB) 0.00672 BRD 0.72828 Comelf (CMF) 0.03157 Erste Group Bank (EBS) 0.546 Oil Terminal (OIL) 0.00076 SIF1 0.0252 SIF2 0.0378 SIF3 0.0252 Santierul Naval Orsova (SNO) 0.63 Transelectrica (TEL) 0.252 Transgaz (TGN) 8.7948 Uztel (UZT) 0.2436 Ves (VESY) 0.003 Banca Transilvania (TLV) 0.03963 Rompetrol Well Services (PTR) 0.02016 Titan (MPN) 0.0105
Final quote April 1, 2009 RON/share 1.5600 1.4900 0.4800 0.4010 6.3000 2.6900 12.8900 0.1390 0.5100 0.4370 0.2980 4.5200 9.8000 117.0000 7.5000 0.0752 0.8100 0.3330 0.3750
Dividend payout (%) 15.48 16.35 8.23 1.68 11.56 1.17 4.24 0.55 4.94 8.65 8.46 13.94 2.57 7.52 3.25 3.99 4.89 6.05 2.80
SOURCES: SSIF INTERCAPITAL INVEST
One sector which has disappointed BSE investors is oil. The only company that will provide a satisfactory dividend is Rompetrol Well Services, with a yield of about 7.5 percent. Petrom and Oil Terminal, whose shareholders had become accustomed to rather large dividends in past years, have chosen either to keep all the profits at the company’s disposal – as Petrom did – or give a symbolic dividend with a yield of less than 1 percent – a move Oil Terminal was persuaded to make as a result of its very low profit last year. “To ensure we have the necessary funds to finance this year’s investment program – a reduced one compared to 2008 – the Petrom management’s proposal is not to give dividends for last year,” said Mariana Gheorghe, Petrom’s CEO. Rompetrol Refining meanwhile does not register on the dividend radar, having last year recorded even greater losses than it did in the previous one.
And MEFIN Sinaia shareholders will not see any dividend this year either – something that is now par for the course. “MEFIN has not paid any dividends since its privatization in 2003. All of the company’s resources have been re-invested, in order to modernize operations and support company development. Management has not revised this policy and does not anticipate a revision in the near term. We hope that the country will offer the necessary conditions to continue the manufacturing of our core products in Romania (and in Sinaia), in order to avoid a possible move to a more investor-friendly country,” said George Barba, president of the administration council at MEFIN. Investors in pharmaceuticals and real estate are also advised not to make any plans for a dividend windfall. “None of the three major pharmaceutical companies on the local market will give dividends this year. Biofarm finished with losses last year, because of financial investments in SIFs, while Zentiva and Antibiotice have chosen to reinvest their profits,” said the Tradeville representative.
(*) Dividends either proposed or already approved by the general shareholders’ meeting
Last year was a tough one for real estate businesses, and the first three months of this year have followed the same pattern. As a result, dividends are off the menu.
The liquidity crisis is another reason that companies have decided to hold onto their surplus cash, even though some of them made a profit last year. dana.ciuraru@bmg.ro
11
ANALYSIS ac Imobiliare as a consultant to supervise the ongoing projects and restructure the company. “The restructuring is still something we are working on very intensively,” he says, without going into too much detail. “It is an ongoing process. I know that I have been given about half a year to do it, so in the next two or three months we should see the result of it,” Virenfeldt tells Business Review in an exclusive interview. He works with the local developer through his project management company. “But from a personal point of view, you could easily see me as a Tiriac employee,” says Virenfeldt from his office in the Tiriac Holding headquarters overlooking Herastrau Lake.
DEVELOPERS
LEARN NOT TO BURN MONEY THROUGH INEFFICIENCY AND POOR QUALITY
X
Tiriac's Danish consultant nears six-month deadline to turn real estate arm around Late last year, Dane BJARNE VIRENFELDT started to work on restructuring the real estate arm of Tiriac Holding, and is now a few months away from seeing the first results. After 25 years of working across South East Asia and the Middle East, among other regions, Virenfeldt has started his own consultancy company and now focuses solely on Romania. By Corina Saceanu
When he first came to Romania, four and a half years ago, Bjarne Virenfeldt didn't necessarily plan to go into project development and management in the capital or countrywide, although he had done so in other places around the world over the previous 25 years. He first set up a production facility that produced wooden building parts in Targoviste, a project that took two years. 12
After being challenged to do more, he decided to expand his activities and move his project management and project development company Tecton International to Bucharest where it has started to manage major residential and commercial projects all over Romania. These activities culminated in a partnership with Tiriac Holding which he entered into late last year. The 53-year-old Dane, who holds a degree in engineering from Copenhagen University, joined Tiri-
“There are a lot of developers who would prefer to run and hide now; some of them probably don’t have the time or financial strength to survive and go through a restructuring process. Some of those companies which have enough funds to keep going, in order to carry on and finish their projects will be forced to consider restructuring their operations, also involving internal procedures and protocols,” Virenfeldt says. “Everyone in Romania right now is learning a lesson every day, and for some, it is a very expensive one. People will have to be taught how not to continue burning money on inefficiency and inadequate quality,” he goes on. “You will not see a lot of projects that are sold just off plan, you will see people inspecting the real thing before buying, through which they will get a true basis for comparison. […] They will start focusing on quality and lifestyle, sometimes prioritizing these values over price.” Some developers will have to realize that designing, building and selling a typical larger residential project in two to three years will probably not happen for much longer. “I believe that due to quality demands, projects will take longer to develop and sell, and that will make the project cycle longer,” the Danish consultant explains. “There are not really many apartments selling on the market right now. We would definitely want to see more apartments sold,” says Virenfeldt, when asked about sales
of the two ongoing residential projects. Tiriac Imobiliare is currently working on Rezidenz residential project, containing 480 residential units, which is close to completion. The market value of the project is EUR 70 million, according to the company. The developer is also working on Stejarii, a 535-apartment project with an expected market value of EUR 230 million. Prior to announcing a restructuring of the real estate business within the group, Tiriac Holding had stated its plans to build mixed projects in Timisoara and Brasov, and overall investment plans of EUR 900 million in the next couple of years. “The projects are all very well defined, but then, as always, there are contractual challenges, an area where I have my strengths,” says Virenfeldt about the residential projects. As an emerging market, Romania is similar in many ways to what the consultant saw during his time in South East Asia and the Middle East. “There, as here, there used to be a lot of easy money to be made in the construction and project development business, and those who decided to develop projects, who were fast and determined, could get into the market, perform and get out again. Some of them got out of it very wealthy, often without ever thinking about what quality of product they delivered,” says Virenfeldt. Much of what has been built in Romania falls far short of buyers’ expectations. “There is a lot of substandard quality around. […] Predictably, when Romania’s economy stabilizes there will be a lot of properties which won't be sold at all, or sold for much lower prices than expected,” explains the consultant. The market asked for more than developers were able to build, and that was mirrored in the quality of projects. “In hindsight, Dubai was probably much worse than what you have seen and still see here in Romania, Asia too, although it was a different time,” he reflects. Apart from the project with Tiriac Imobiliare, Virenfeldt's company is working on several other developments in Iasi, residential projects which total several hundred apartments and office and retail schemes in the city. corina_saceanu@bmg.ro BUSINESS REVIEW / April 6 - 12, 2009
Estates&Construction
MARKET
APRIL 6 - 12, 2009 / VOLUME 14, NUMBER 12
BUSINESS REVIEW FORUM
Manage your business environment !
Ocif delays start of Pipera project, Vivando apartment prices down 10 percent
COURTESY OF OCIF GROUP
Libby Weizman, managing director of Ocif Group, predicts that the Pipera project will not start this year
Real estate developer Ocif Group, which has partnered a Rothschild investment fund for residential projects in Romania, does not expect to start construction works on the residential project it was planning to build in the Pipera area of Bucharest, although it already has almost all the necessary permits in place. “The plot is suitable and has a PUZ for 1,700 units, it’s a large scale project. This kind of project should start in steps, with a couple of hundred units. My best guest is that the project won’t start in 2009,” Libby Weizman, managing director of the developer, tells Business Review. “Due to the challenging economic environment and the infrastructure issue we will review commencing the project on a quarter by quarter basis.” Construction loans are not feasible for
projects in Pipera at this moment, because banks are now looking at other projects, Weizman adds. “Pipera enjoyed demand from foreign individuals, and this demand has already been met. The next wave which will be coming to Pipera is local demand, which will come after the infrastructure is addressed,” he explains. The developer, which is six months away from delivering the 110-unit Vivando project close to Unirii Square, has so far sold 30 percent of the apartments in this project, and none of the buyers used mortgages. Weizman, who took the helm of the company in February this year after the former co-managers had resigned, is now focused on the sales and marketing campaign for the project. “I took the sales and marketing in house the moment I came in.
I increased the project’s exposure; instead of one agent with exclusivity, we now work with selected agents. I am looking at the local demand, and there is local demand. I am looking at those individuals who have most of their money in cash, and there are more than 100 people in this category,” Weizman explains. The price per sqm of apartments in Vivando is down by 10 percent, from EUR 2,200 per sqm in the previous sales session, to EUR 2,000 per sqm with more recent sales. “The previous management's intention was to increase the sale price while the construction advanced, which is something that market conditions no longer allow. There is also substantial value that can be achieved through rents. But for me it is not an option to have a substantial reduction in price,” says Weizman. He plans to sell the remainder of the apartments in the project, but has not ruled out renting the ones that remain unsold. A combination of renting and buying the apartment afterwards, subtracting the rent from the final price, is also a possibility. Weizman says profit margins on residential projects have not changed much due to a fall in construction prices. “But the turnover, the liquidity of a developer and the ability to sell are more important now than profit margins. […] You can work on very small margins as long as you have sound pre-sales. And you will not survive with a huge envisaged margin if you don’t have pre-sales,” Weizman explains. A small margin would be ten percent, while big margins are of around 30 percent. This is still achievable on the Romanian market, he says. Corina Saceanu
ESTATES & CONSTRUCTION MARKET
CA Immo sees Bucharest Business Park market value slump 17 percent Office building Bucharest Business Park, owned by Austrian investment fund CA Immo, was evaluated at EUR 67.6 million in 2008, 17 percent down on 2007’s EUR 81.3 million. The rent yield reached 7.9 percent, and the fund made EUR 5.3 million in rent, a company reports states. The firm’s financial results included global gross revenue of EUR 299 million in 2008, up from EUR 144.57 million in 2007. Its EBITDA was
EUR 138 million in 2008, 46 percent of gross revenues. CA Immo is one of several investment funds to have seen their Romanian portfolios fall in value, with Immoeast and Atrium similarly hit. The firm had assets worth EUR 2.5 billion in 2008, with the acquisition of German real estate developer Vivico, which increased the group asset portfolio by 42 percent. Magda Purice
RICS awards 16 local memberships é The local branch of the Royal Institute of Chartered Surveyors (RICS) has
elected 16 Romanian professionals as members of RICS and is looking at running interview sessions with 10 to 12 candidates later on this year, RICS has announced. Apart from professional experience, the other most important factor is an understanding of the RICS’s code of conduct and professional ethics. The 16 new RICS members are: Monica Barbu, previously with Colliers, Radu Boitan of King Sturge, Gabriel Chimisliu of Colliers, Doinita Costache of Cushman & Wakefield, Denis Donoiu of Atisreal, Cristina Dumitrache of Cushman & Wakefield, Mihai Grigore of Colliers, Dan-Nicolae Ivanov with Jones Lang La Salle, Resul Kilic of King Sturge, Ioana Momiceanu of Atisreal, Aurora-Speranta Munteanu with PricewaterhouseCoopers, Alexandru Pocatilu with King Sturge, Bogdan Victor Sergentu with DTZ Echinox, Florin Sorea of Cushman&Wakefield, Victor Stan with SHM Smith Hodgkinson and Levis Vlad with Jones Lang La Salle.
Dambovita Center gets town planning approval, faces asset reduction The Bucharest authorities have recently approved the zonal urban planning for mixed use project Dambovita Center in Bucharest, run by Israeli developer Plaza Centers. An estimated EUR 927 million will go into the project, which is set for completion in 2015. The sum is higher than previous estimates of around EUR 600 million in previous reports. The project, a 34-level building of 722,000 sqm in built area, with 4,500 parking bays and 600,000 sqm of commercial space, will be developed on 10 hectares. Early stages, comprising commercial space, offices, hotels and residential, were set for completion in 2012 but were put back a year. The land fell in value by 17 percent in 2008 from 2007, to EUR 158.7 million.
In line with the market, Plaza Centers, controlled by businessman Mordechay Zisser, saw a general depreciation of its local properties. Plaza Centers reported pre-tax earnings of EUR 68 million in 2008, compared with EUR 227 million in 2007. The firm’s annual financial report attributes the significant difference to the disposal of Plzen Plaza in the Czech Republic, price adjustments following the sale of Arena Plaza and gains from financing activity. In the same report, the total asset value increased from EUR 761 million in 2007 to EUR 959 million in 2008, while the net asset value dropped 35 percent to EUR 0.7 billion in 2008, from EUR 1.06 billion in 2007. Magda Purice
Militari Shopping Center opens, developer to rethink Arad and Constanta projects Atrium European Real Estate, the developer of Bucharest commercial complex Militari Shopping Center, recently opened a commercial gallery of some 60 shops and 16,000 sqm of GLA from a total of 51,400 sqm, at an estimated cost of EUR 75 million. “The project developer intended to continue this investment no matter the economic background,” said Bogdan Dancau, CFO of Atrium. Stephan Bonk, MD of Atrium European Real Estate, said he plans to rethink projects in Arad and Constanta, to simplify them, thereby reducing total investment. Atrium’s land in these two cities amounted to 13.5 million, said its financial report. Overall,
Green City Construct launched Green City Residence - a green paradise with houses at the price of an apartment
Atrium owns properties evaluated at EUR 1.7 billion and ongoing projects requiring EUR 727 million of investment. Last year, it reported a cash flow of EUR 1.25 billion, along with loan debts of EUR 1.5 billion and maturity after 2011. Militari Shopping Center’s commercial area hosts anchors such as IT&C firm Media Galaxy, Domo and a Praktiker DIY unit. French retailer Auchan is paying EUR 20 million to rent a 12,500sqm hypermarket within the complex. The fashion galleria brings new names, such as C&A, Mladinska and Imaginarium, plus first entries on the Bucharest market like New Yorker. Magda Purice
German DIY retailer Obi expands to Pitesti and Arad
14
ropolitan area. It rejoices a very good location which offers facilities like a park of 40 hectares, a 40 hectares lake, private kindergarten and school, trade center, hotel, spa and wellness center, inside and outside swimming pool, 6 tennis court, town equipment and systems ( electricity, town water, drainage, TV cable, immovable telephony ). At the end of this year, more than 300 houses will be ready to build and, until 2013, the whole project of 4000 houses will be finished, including two office buildings. The exclusive agent of the project is the real estate agency Eurometropola.
ADVERTORIAL
On 26th March was officially launched the residential project GREEN CITY RESIDENCE right at the location, 1 Decembrie village. There, the developer presented the model house Neva, completely furnished, the construction site (the baking of 68 houses are finished) and the center`s restaurant, where took place the reception. The offer is: Neva House – P+1 Structure, 158 sqm for only 84.000 euro + 5% VAT. Green City Project is developed in 1 Decembrie village, an affordable area which will develop in the next five years by a harbor, an airport and a Met-
German DIY chain Obi has recently opened two stores in Romania, in Pitesti and Arad, delivering around 10,000 sqm each, the company says. The openings are part of the retailer’s local strategy of opening at least five more units in Romania in 2009, including these two, after it opened up in Oradea and Bucharest in 2008. Last year, the firm announced investment plans of around EUR 50 million for Romania, for opening 13 units in cities with over 75,000 inhabitants. “Our company’s strategy in Romania is to secure development spaces in retail parks, rather than starting a greenfield investment which is more difficult,” said Dieter Mess-
ner, board member with the company. A regular Obi unit involves 8,000 to 12,000 sqm of sales space and employs 120 personnel. The German operator owns 509 DIY stores in 11 countries, of which 330 are in Germany. According to Messner, the company gets 50 percent of its sales from its home market. On the back of its extension plans, the retailer seeks the market leader position on its targeted markets and a 50 percent increase in business results in the coming years. Obi posted sales of EUR 5.8 billion in 2007 on European markets. Its local competitors are Praktiker, Bricostore, BauMax, Hornbach and Mr. Bricolage. Magda Purice BUSINESS REVIEW / April 6 - 12, 2009
ANALYSIS
LAURENTIU OBAE
The service is expected to be most popular with the young, due to their high mobile phone usage
Mobile banking services go fishing for clients Mobile banking services have been available for some time to customers of telecom operators, with some lenders, such as Banc Post, Raiffeisen and BRD, already offering them and others considering entering on the market. Just a week ago, good.bee, a member of Erste Group, launched banking services via the mobile phone in partnership with the Romanian Commercial Bank (BCR), aiming to reach customers who have never used banking services. By Otilia Haraga
“In the last few months, we’ve seen some interesting increases in this area. There is a greater focus from banks on bringing this service to their customers,” say officials from Vodafone Romania. The economic crisis has conBUSINESS REVIEW / April 6 - 12, 2009
tributed, to an extent, to the success of this service, since customers are constantly looking for more effective ways to rein in their costs and spending. “We are expecting the numbers to increase as banks will push the service more this year due to the new economical context,” say company officials. According to research by
good.bee Romania, there are currently 8.2 million Romanians who do not have access to basic banking services. “There are people who do not even have a bank account or a debit card. Most do not have access to these services because of the distance from where they live to the closest bank branch,” Sorin Bulai, general manager of good.bee in Romania, tells Business Review. However, Romania has a high mobile telephony penetration, which makes it a favorable market for mobile banking services. “If we take into account the size of the country, the distance between localities and the popularity of mobile telephony, transactions through a mobile phone represent a very attractive offer. We are extremely confident in the success of the project in Romania. We also intend to launch good.bee Mobile Transactions on other European markets where we work, which have the potential for such a service,” said Sava Dalbokov, general manager of good.bee Holding CEE. However, Bulai says the level of these services on the local market is very low at the moment. “Several banks have already announced projects targeting the mobile banking segment,” he says, and the GM expects other players will follow suit. This could afford a good head start to those that move fast on the market, especially in attracting those members of the public who have still not been “claimed” by any bank. At the moment, all the mobile operators on the Romanian market offer their customers the opportunity to access mobile banking services, in partnership with lenders such as BRD, Raiffeisen, BCR and Banc Post. Still, there are several clear differences between the mobile services offered until now and the one offered through good.bee. They consist largely in the type of customer, in the sense that good.bee/BCR serves postpaid and prepaid customers, while Raiffeisen and BRD mobile banking is available only to postpaid. When signing up for the good.bee/BCR mobile banking service, customers do not have to go to a bank branch. Currently, Vodafone cooperates with Raiffeisen and BRD as part of the Vodafone Mobile Banking service, and more recently with good.bee which facilitates banking transactions via mobile phone in partnership with BCR. The plans for ex-
tending this service in collaboration with other banks will not be expanded for the time being, at least in Vodafone’s case. “We do not have other plans available for the moment, but we are open to discussions and new opportunities,” say company officials. good.bee Service RO was founded in September 2008 as a result of the partnership between the Erste Foundation and Erste Group, which were joined at Central European level by Wizzit Ltd of South Africa, a pioneer of payments through mobile phones. The shareholders of good.bee Service RO also include consultancy company Central European Financial Services SA. good.bee Mobile Transactions offers users the possibility to check their current account, recharge any mobile card, transfer money instantaneously to any other good.bee client, transfer money to any account in RON in Romania, or manage their account from a mobile phone. Additionally, people can also perform standard operations with a debit card – make cash withdrawals from any ATM in the country or abroad, pay in the stores throughout the country and abroad, pay bills at the BCR’s ATMs as well as carry out any transaction that can be made in BCR branches (deposit/withdrawal of cash, payment orders and so on). good.bee Mobile Transactions was designed to be used by any person over 14 years of age with an average education. “Still, considering the popularity of mobile phones among the young, we believe good.bee Mobile Transactions will be much more attractive to active people aged between 14 and 35 years old,” says Bulai. He explains that this service is available “anywhere and to everybody” and the costs of using it are relatively low, which qualifies it as a “general use” service. Bulai estimates the service will have more than 100,000 customers by the end of 2009. good.bee Service RO currently has 24 permanent employees, most of whom work in the operations and customer support departments. The sales team is coordinated through eight regional centers located in eight of the biggest cities in Romania. The initial investment amounted to EUR 1.5 million and the share capital reaches over RON 6 million (about EUR 1.4 million). ■ 15
ANALYSIS / FILM REVIEW
PR agencies and clients FILMREVIEW: reshuffle strategies in 2009 Slumdog Millionaire
Ever since the economic downturn rang the alarm bells, companies have
sought to cut costs, slashing HR, marketing and advertising activities, along with trying strategies of restructuring businesses. Meanwhile, they still hope to make a profit. Some of the PR agencies affected told Business Review how such firms are coping with the industry slump.
Final answer? Dev Patel and Frieda Pinto
By Magda Purice
Danny Boyle’s 2008 smash hit Slumdog Millionaire is what kind of film? A. An uplifting rags to riches tale of a street child made good. B. Poverty porn, which shamelessly cashes in on the deprivation of Mumbai’s slums. C. A beautifully shot homage to India. D. A facile and predicable love story. Is that your final answer? There can be few people left who have managed to avoid the Slumdog buzz, especially since it swept the board in February with eight Oscars. The story, in case you are one of the three people who haven’t heard it, follows young Jamal (Dev Patel as an adult) on his journey from the Mumbai slums of his childhood to the precipice of a great fortune, courtesy of TV game show Who Wants to be a Millionaire? But how can an uneducated pauper, a mere slumdog, possibly have correctly answered a series of tough questions? Slippery host Prem Kumar (Anil Kapoor) smells a rat, and the Mumbai police haul Jamal in for what the Bush regime might euphemistically have termed “enhanced coercive interrogation techniques” (viewers of a sensitive nature may want to cover their eyes for the early scenes). Once unhooked from the electrodes, Jamal starts to explain that he got the answers right not through cheating, but because various episodes from his past, shown in flashback, each coincidentally corresponded to a question. It’s a novel premise for a film, and one that works well, largely because the flashbacks are such cracking stories. Humour, horror, love, crime and high drama are dished up in bite-sized chunks, against a colourful Indian backdrop. Whether it’s the young Jamal burrowing out
Firms delivering communication policies and advertising fear of an average loss of around 35-40 percent of their annual turnover due to clients’ low budgets for this year. According to First Impression agency, the main changes will be seen in BTL and outdoor. Print and TV are also in the firing line, as they involve high costs for campaigns that are not certain to deliver fast results. At end-2008, agencies identified a shift in their client briefs for this year, with more precise targets and faster and clearer results for public communication. Judging by the agencies which agreed to reveal their strategies, it seems that PR and internet advertising, through their small decreases, will take up the slack left behind by cuts in marketing campaigns and the advertising mix of TV and print.
CHEAP
BUT CREATIVE STRATEGIES
A study by Anteea Consulting, which specializes in delivering marketing and business solutions, found that the worst falls have hit the mass market events segment, large advertising campaigns and business events. According to the agency’s data, clients have been advised to switch their advertising or image campaigns to social marketing and creative events, as well as PR campaigns. The agency said the only firms to have entirely ceased to outsource their advertising and communication services to it are the big real estate accounts. “Clients from the real estate and automotive industries have significantly shrunk their project volumes, while the ongoing ones are strictly planned and approved quarterly. Pharmaceutical and retail clients have kept up the steady trend of the last few years, with no big 16
changes,” added Dan Florescu, consultant media and partner at Sound Communications. The loss in Agama’s portfolio took the form of a Romanian company (e.n: from the healthcare field) which decided to cancel its partnership with the agency and hire an internal junior PR. Representatives of First Impression said, “Stopping outsourcing may balance the books but only if the substitute is well trained and experienced.” Bianca Iuga, associate partner of Agama Consulting notes the danger of substituting a specialized service from a senior consultant or an agency for a junior who only executes and does not deliver communication strategies. On a challenging year for most industries, Saatchi & Saatchi still intends to make a profit at end-2009. After making a loss in 2007, the next year will be profitable for the agency, according to MD Mona Opran. “Even though the market is tipped to freeze, the agency’s business will surely grow. Even now, company revenues have already exceed the forecasts from early 2008, and next year is expected to bring even higher growth with the focus on the new-business segment and the improvement of our creative product. Most clients have cut their media budgets but, even so, the creative component will bring revenues to the agency and clients as well,” said Opran earlier this year. In 2008, the agency grew organically by 15 percent. Although its representatives do not foresee concrete problems for 2009, they are not ruling out difficulties which could lead to budget costs or downsizing. “I think that a bright idea sells better than a good one. In the next year, we will have to calculate 10 times and cut once when spending money, but we also have to understand the way that our consumers think with the right message,” Opran said. ■
of the business end of an outdoor toilet to get his favourite Bollywood star’s autograph, or a tense race-against-time reunion with his long lost love at a railway station, the vignettes are always gripping, even if they test the bounds of credibility too often. Accompanied on his travels by his double-crossing brother Salim (Madhur Mittal), Jamal’s goal is to find his childhood sweetheart Latika (Frieda Pinto), from whom he becomes separated in some of the most shocking scenes of the film. His nemesis is gangster Maman (Ankur Vikal), a recurring figure in the trio’s lives. With its extremes of poverty and riches, broad-stroke archetypal characters and reliance on coincidence, there is something enjoyably Dickensian about Slumdog. Its good old-fashioned melodrama and thrills and spills galore make it hard not to be drawn in by this eminently likeable movie. But eight Oscars? More than the Godfather and Godfather II? More than Casablanca? For all that it is an excellent piece of entertainment, Slumdog has a trite and predictable plot, one-dimensional characters and appeals entirely to the heart without troubling the head. If this was the most Oscar-worthy movie made in 2008 – and it could well have been – it does not say much for the current state of intelligent film. On the ethical side, the spectacle of the child actors involved being paraded at the Oscars’ ceremony then shipped back to the slums in which they live was discomfiting – although the picture celebrates India as much as it censures it. Such is Slumdog’s charm, that it feels churlish to make such comparisons or criticisms. This is cinematic comfort food of the highest order. Debbie Stowe Director: Danny Boyle, Loveleen Tandan (co-director India) Starring: Dev Patel, Freida Pinto, Madhur Mittal, Anil Kapoor, Ankur Vikal On at: : Hollywood Multiplex, Cityplex, The Light, Movieplex BUSINESS REVIEW / April 6 - 12, 2009
RESTAURANT REVIEW
Bistro dining LE BISTRO AT CENTRE VILLE, 2-4 LUTERANA ST, TEL: 021 305 38 38 wo years ago I wrote this place up in this newspaper with the comment that the food was quite good, but the place was an absolute dump! I heard they had refurbished, so I returned to see if the food could match their new décor. They have spent a few sheckles on the refurbishment, which took some six months to complete. The restaurant is now on two levels. There is the Luterana Street entrance, which is all bistro/bar/wood with neutral colored plaster walls, and two floors up in the lift there is their daytime and summer terrace restaurant (same menu) attached to the fabulous garden terrace of the Radisson. With glass walls, they capitalize on the Radisson’s beautiful terrace and pool. OK, in the summer you will not be sunbathing around the Radisson’s pool, but you can press your nose against the glass walls and dream on. The House is pretty confident in its potential as they have not yet even posted their name outside. Suffice it to say that the Luterana entrance is impossible to miss (even without a name) as the Centre Ville building occupies almost the entire street of Luterana on the right hand side. So, let’s eat. At 8 o’clock on Tuesday, the place was more than half full after being open for only two weeks. Proof if it be needed that word has gone around. Was it because it was new and people wanted to check it out, or was it because it was really good? Read on and decide for yourself. I selected as my dinner date a difficult-to-please, choosy little thing who doesn’t eat meat. This would normally present a problem for the House, as most good chophouses in this town are seriously geared up to satisfy carnivores. But this girlie was as happy as a ‘pig in hog heaven’ when she saw the menu. Apart from salads, there was an ample selection of fish dishes. Although girlie doesn’t eat meat, she (as part of a growing trend in town) does eat fish. God forbid that I
T
LAURENTIU OBAE
BUSINESS REVIEW / April 6 - 12, 2009
Greece is the word: The Med meets the Middle East at the renovated Le Bistro at Centre Ville
would ever take out a loony vegetarian! So we started with a huge ‘focaccia with calamari, shrimps, garlic sauce and peppers’, all of it garnished with fistfuls of fresh coriander. Focaccia is a heavy flat bread which is seasoned and topped with a selection of herbs such as oregano, thyme and basil, and is usually crisped-off with Parmesan. I was delighted to witness the House baking their own focaccia in a clay oven. It was excellent. We passed on further focaccias such as: vegetable only (no thanks), minced lamb with pomegranate sauce (a Persian favourite), or with chicken, pesto, ruccola and Parmesan. Whilst girlie was furiously stuff-
ing her face with focaccia, I took some time out to peruse the menu. It is absolutely not Italian, although there were some look-alike Italian dishes. Let us just say it was a case of ‘Middle East meets Middle Mediterranean’. To prove my point there was a choice of three unpretentious, simple roast dishes of dorada with olive oil and lemon, or prawns, or chicken legs with a yogurt dip. These were served on a hot plate with an ample portion of vegetables. There was a heavy leaning towards Greece with all the starters, including a superb platter of Greek olives and fiery red pickled pepper. If you don’t know your olives, please trust me that the House’s
choice of Kalamata olives was a wise decision, for they are probably the finest in the world. Deep purple in colour, they are fat and meaty. They contrast well with the Thassos olives which are mild, salted and sundried. There was much you would expect from a Greek menu, with numerous other starters using safe staple ingredients such as: hummus, tabouleh, falafel, pine nuts, mint, goat cheese and tahina sauce. Then the menu flips away from Greece with six Italian pasta dishes. You will know them all, they are safe and recogniseable. For mains we had house-made sausage served on a mountain of mashed potato, chestnuts and caramelized apples. My mistake, as I should have realized that the sausage would be flavoured to Romanian tastes, rather than European, but no matter. They also had mititei on the menu. Enough said! Their Argentinian steaks were as good as they get. There has been much hype about Argentinian beef since the Intercontinental Hotel introduced it to Bucharest three years ago. It subsequently caught on like a wildfire with other restaurants. Some imports were good, others were average. However, less enlightened restaurants chose the nearest equivalent imports from Brazil which were absolute crap. But it appears that there is more than one importer of Argentinian beef, and the House has chosen well. Go for it There was also fresh tuna and salmon in a pistachio crust, both of which we passed on, but we shall try on our next visit. This is a nice, friendly place with nice friendly staff. It is absolutely one of the better chophouses I have witnessed this year. Michael Barclay mab.media@dnt.ro 17
EVENTS
CMU and Romanian Royal House offer needy free medical treatment
A partnership between Unirea Medical Center (CMU) and the Romanian Royal House will see that impoverished people who apply to the Royal House in need of medical attention are directed to
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Michael Bolton will return to Romania for a new concert entitled “The Very Best of Me”, which will include all his famous hits. Bolton is a prolific artist with over 53 million records sold, two Grammies and six American Music Awards. He has also composed songs for other equally famous artists such as Barbra Streisand and Cher, and co-authored songs for Bob Dylan and Diane Warren. The American has played alongside Luciano Pavarotti, Placido Domingo, Ray Charles and BB King. He is also a keen philanthropist, having donated over USD 3.7 million to improving the life of disadvantaged individuals worldwide.
Controversial rock icon Sinead O'Connor will play Bucharest on June 11 at the Arenele Romane venue. The singer is equally known by the large public for the song “Nothing compares 2 U” and for her penchant for creating controversy. The Irish artist started her career by appearing with U2’s guitarist The Edge on the soundtrack of the movie The Captive. Later, she criticized U2’s music as “bombastic,” to the detriment of her relations with the music world. Tickets for the concert can be bought for RON 79 on April 17 and later at RON 109 through the site www.ticketpoint.ro as well as from the box office of the Palace Hall and in the Diverta store network in Bucharest. 18
Pioneers of electronic music Kraftwerk will perform in Bucharest for the first time on July 12 at the Palace Hall. Kraftwerk, a German band that was founded in 1970, made a major contribution to the development of electronic music. A real avant-garde group at the time of their appearance on the international stage, they played a musical style known as synthpop, electro, techno, house and intelligent dance music. Tickets for the concert cost RON 100, 150, 220, 300 and 500 and can be bought from www.myticket.ro and the Diverta store network.
COURTESY OF 2ACTIVE PR
MEDIAFAX
King Mihai I came to visit the CMU facilities
CMU clinics where they will receive care free of charge. Patients can receive any kind of consultation and treatment available within the CMU clinics and hospitals. At the same time, those who need assistance and support in finding and accessing the necessary financial and medical resources will also receive help. “The partnership with the Royal House gives us the chance to come to the aid of severe cases and offer a glimmer of hope. We are grateful to the Royal House for the involvement and support given to this project which we hope will be a hand reaching out to people who are most in need of support,” said Wargha Enayati, general manager of CMU. Otilia Haraga
World Autism Awareness Day marked in Bucharest
Bucharest joined the group of cities where World Autism Awarness Day was celebrated
World Autism Awareness Day, which aims to increase awareness of autism in society and encourage early diagnosis and intervention, was marked worldwide last week on April 2, as well as in Bucharest where children, parents, volunteers and supporters of this cause met in Universitate Square. There is cur-
rently an ongoing campaign “Together We Will Defeat Autism” that has been unfolding since November 2008, initiated by the Romanian Angel Appeal Foundation, the Foundation for the Development of the Civil Society and the Vodafone Foundation. Autism is a neuro-biologic condition which appears at birth or around two-three years of age but can be diagnosed at 18 months or earlier. Sufferers have socializing, verbal or non-verbal communication deficiencies and stereotypical and repetitive behavior. International statistics from the 1990s show the incidence of autism-related conditions is 1 for every 166 children, making it a more widespread condition than cancer, diabetes, AIDS or Down’s syndrome. Autism can appear in any family irrespective of social environment, race or ethnic group and is four times more widespread in boys. Otilia Haraga The price of the one-day tickets for the B’Estfest international festival will remain unchanged at RON 110 until the Easter holidays. The organizers, Emagic Entertainment, had announced it would raise the price to RON 130, but this will now happen after April 20. This year’s line-up includes THE KILLERS ( in pic) Thievery Corporation, Moby, Franz Ferdinand, Motorhead, Santana, The Charlatans and The Ting Tings. B’Estfest takes place between July 1 and 5 at Romexpo. Those who wish to attend more days of the festival can acquire a subscription for July 2, 3 and 4 from the site www.myticket.ro or from the Diverta store network.
Three plays staged courtesy of Raiffeisen Art Project Three theater plays by actor and playwright Mimi Branescu will be staged at the Act Theater with the help of Raiffeisen Art Project. “All my theater texts are more or less successful attempts. They are an exercise for the actors first of all. They do not contain profound messages and do not propose or debate grand, universal themes, because of the impossibility of doing so. They are inspired from the immediate reality and told honestly,” said
Branescu of his plays. The three plays are entitled Flowers, Movies, Girls and Boys (staged by director Vlad Massaci), The God of Next Day (Claudiu Goga) and At Dad’s Place (Alexandru Dabija). Raiffeisen Art Proiect, an initiative of Raiffeisen Bank, aims to support and promote the development of valuable projects for Romanian culture. Otilia Haraga BUSINESS REVIEW / April 6 - 12, 2009