LOCAL FIRM ROMSTRADE LANDS A EUR 140 MILLION LOAN FROM CREDIT SUISSE; SEE PAGE 4 ANALYSIS
The new forfeiting tax could cause price increases for consumers and even more tax evasion, says Angela Rosca of TaxHouse See page 9
REAL ESTATE
The local office of real estate consultancy firm Jones Lang LaSalle expects similar business to 2008 and has no plans to axe staff, says MD Charles Krick See page 13
ANALYSIS
The Economy Ministry is now planning two to four national energy companies, instead of one large one, as it announced last year See page 15
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ROMANIA’S PREMIERE BUSINESS WEEKLY
APRIL 13 - 19, 2009 / VOLUME 14, NUMBER 13
PLENTY OF ROOM AT THE INN
The local hotel market has followed the worldwide downward industry trend, seeing room rates and occupancy fall. But hotel managers see a flicker of hope in the last quarter of this year and the beginning of 2010 LAURENTIU OBAE
See pages 10-12
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NEWS
BRIEFS OTP CONSULTING ROMANIA TO SEE PROFIT IN 2009 é OTP Consulting Romania, the consultancy arm of the OTP financial group, estimates it will reach a turnover of EUR 1 million in the next three years. In 2008, the firm’s turnover exceeded EUR 100,000, which it intends to raise to EUR 325,000 by the end of 2009. So far, OTP Consulting Romania has three regional offices and by September, it plans to open a local office in eastern Romania.
BCR ESTIMATES 20 PERCENT RISE IN COMPANY LOANS é Local bank BCR estimates it will increase its credit portfolio on the SME segment by 20 percent in 2009 on 2008, a similar increase as for the corporate loans segment. Currently, the bank has 250,000 customers registered as SMEs, 60 percent of its corporate operations segment. EURO MEDIA GROUP EYES ROMANIAN TV AND MOVIE MARKET é Euro Media Group, the main provider of television and movie services in Europe, is interested in the local market, according to the Ministry of Communications and Information Technology (MCTI). Ministry representatives have met Euro Media Group officials and talked over a possible partnership, as the Romanian market has become more interesting since the government approved the broadband strategy and launched an analog-digital strategy. 4
LAURENTIU OBAE
CLAL EXITS LOCAL MARKET WITH EUR 3.6 MLN LOSSES é Israeli financial group Clal Group has sold its Romanian insurance subsidiary to a consortium of local businessmen in a deal worth EUR 500,000, resulting in EUR 3.6 million losses for the Israeli group. Clal invested over USD 23 million in its Romanian-based subsidiary, which has operated on the Romanian market since 2006. To keep the local subsidiary, the group needed to invest about another EUR 5 million in 2009.
Local Romstrade lands EUR 140 million financing from Credit Suisse
The financing will fund the local company’s infrastructure projects
Romanian company Romstrade has closed a EUR 140 million financing deal with Credit Suisse which will be used to provide financing for the company's infrastructure projects. This is the largest financing deal sealed by a Romanian company since the beginning of the year and also the largest one
contracted by a construction company with infrastructure projects. The EUR 140 million facility will allow Romstrade to buy promissory notes issued by the National Highways Company as payment for the road construction and repair works. Reff & Associates, the law firm
affiliated to Deloitte Romania, assisted Romstrade as lead legal advisor in negotiating and closing the deal, while Badea Clifford Chance assisted the lender. The Romanian company is planning to reach a total of EUR 400 million in signed financing deals. The firm has already received some of the money from Credit Suisse and should get up to EUR 90 million of it by the end of the year. Romstrade, a construction company owned by Nelu Iordache, also the owner of low cost carrier Blue Air, has EUR 600 million worth of contracts in the pipeline for the next three years. Towards the end of last year, the firm had around 1,100 staff and in 2007 posted EUR 185 million in turnover. Reff & Associates is currently working on three other deals with a total value of close to EUR 400 million, according to the company. Corina Saceanu
Bank of Cyprus plans to double deposits portfolio by year-end The local subsidiary of Bank of Cyprus estimates it will double its deposits portfolio by the end of this year, while also increasing its loan portfolio. “We estimate that we will grow our loans portfolio by a double digit figure and double our deposits from the current EUR 100 million. In terms of profit, we will manage to keep the same level as last year, if not exceed it,” said George Christoforou, general manager of Bank of Cyprus in Romania. The bank’s profit last year, its
first full year on the market, was EUR 3 million, which was the lender’s first profit since entering Romania in 2007. The bank will continue to expand in Romania, from its current 11-branch network, by adding three more units in the next two months. The local subsidiary receives financing, over EUR 1 billion on the medium and long term, from its mother bank. Some of the loans granted by the local subsidiary have been allocated to the mother bank's portfolio.
The lender plans to restructure some of the loans in its portfolio by amending the grace period and the maturity. The mother group is present in Romania through Bank of Cyprus and Cyprus Leasing. Bank of Cyprus entered the Romanian market in 2007. Its initial investment plan for 2009 reached EUR 20 million. The bank currently has 500 retail customers, 100 corporate customers and 100 SME customers. Corina Saceanu
Rompetrol pumps USD 16 million into station control center Rompetrol Downstream, the retail division of the Rompetrol Group, has completed a USD 16.3 million investment in its first station control center, according to a statement from the company. Rompetrol Operations Center (ROC) will supervise and manage the energy giant’s fuel transport and distribution operations in Romania, and will
oversee the operations of its gas station network. Currently, ROC manages the mobile gas stations Rompetrol Expres. By the end of August, it will complete the system implementation for partner Rompetrol stations and the other stations run by the company. “The new ROC will contribute
significantly to improving solutions, processes and equipment at the stations,” said Titov Buzescu, Rompetrol Downstream general manager and retail and marketing vice-president of the Rompetrol Group.Rompetrol Downstream operates over 450 filling stations and seven fuel deposits. Dana Ciuraru BUSINESS REVIEW / April 13 - 19, 2009
NEWS
EBRD invests EUR 1.1 billion in Eastern European region, pledges more
The European Bank for Reconstruction and Development (EBRD) invested EUR 1.1 billion in Eastern Europe in the first quarter of this year, up 64 percent on the same period of 2008, when the figure was EUR 678 million. The investment was aimed at counterbalancing the effects of the international financial crisis in the region, and should reach EUR 7 billion in total by the end of the year. Last year, the bank invested EUR 5.1 billion in the region. The EBRD has reacted to the impact of the crisis on Eastern European countries, significantly increasing investments in the first quarter of this year, say representatives.
ROMPRES
STOCKEXCHANGE
The total EBRD financing will reach EUR 7 billion
The lender recently joined the European Investment Bank (BEI) and the World Bank for a EUR 24.5 billion investment program in the region over the next two years. “The EBRD is prepared and wants to support Eastern Europe even after the crisis ends. The investments we have made so far this year are not enough to carry out our promise,” said EBRD president Thomas Mirrow. The bank will increase its investments in Romania 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 go to the financial sector, and the rest will be invested across the broader economy, including in the corporate, energy and energy efficiency and national and municipal infrastructure sectors. The international funding package aims to cushion the effects of the sharp drop in capital inflows, while implementing policy measures to address the external and fiscal imbalances and strengthen the financial sector. Current EBRD commitments in Romania stand at EUR 1.9 billion in 110 projects. The bank recently lent oil and gas company Petrom EUR 300 million in a corporate senior unsecured loan. Corina Saceanu
Romtelecom launches mobile internet offer
Yorgos Ioannidis, CEO of Romtelecom
Romtelecom officially launched its mobile internet offer based on CDMA technology, in the largest cities in Romania both for residential clients and companies, last week. The offer from Romtelecom Clicknet addresses customers in 20 cities including Bucharest, Brasov, Cluj Napoca, Craiova, Piatra Neamt, Ploiesti, Constanta, Arad, Iasi, Sibiu, Drobeta Turnu Severin, Oradea and Galati as well as 450 sites around the country.
The new services will be launched and promoted locally and regionally and the coverage will be continually expanded to other urban and rural areas. Currently, nearly 170 stations have been set up, but their number will increase every day, according to company representatives. “The Romtelecom strategy for CDMA consists of expanding the network to offer supplementary services, including to areas where the installation of fixed infrastructure such as cable or fiber is not economically viable. Thus, we will contribute to a reduction in the digital gap between urban and rural areas by offering fixed voice and wireless broadband services,” said company representatives. Customers who wish to sign up for mobile internet can choose from four offers which include a monthly traffic between 0.5 and 12 GB. Among telecom players, Vodafone, Orange, Zapp, and RCS RDS already offer mobile internet services. Otilia Haraga
RBS Securities ends activity in Romania RBS Securities brokerage company, part of the Royal Bank of Scotland (RBS) group, has ceased its activity in Romania, after RBS started trading directly as a broker on the Bucharest Stock Exchange (BSE) at the beginning of March. RBS Securities has asked for its authorization to be withdrawn, according to the National Securities Commission (CNVM). The bank has also been accepted as a participant on the derivatives market managed by the BSE. In March, RBS Securities intermediated RON 2.6 million of transactions. The brokerage company is obliged to keep its transaction records, as well as records of all its investment activities and services, for five years from now. Royal Bank of Scotland’s local subsidiary, RBS Romania, recently rebranded from ABN Amro, is up for sale after the bank’s mother group decided to BUSINESS REVIEW / April 13 - 19, 2009
dispose of its non-core assets in the next three to five years. The move comes despite the local bank turning a profit, and being among the most solid banks in Romania, according to Romanian Central Bank governor Mugur Isarescu. RBS Romania’s president, Peter Weiss, said that this was a strategic group decision and that it did not reflect the bank’s situation or its market position and performance. After posting a EUR 28 billion loss last year, RBS has decided to restructure and put its subsidiaries into three categories. Romania is among the countries in which the group is exploring new ownership, which also includes Argentina, Slovakia, Chile and Venezuela, from a total of 15 countries, according to an RBS presentation to its investors. In Romania, the bank currently has a network of 27 branches in 15 cities. Corina Saceanu 5
NEWS
BRIEFS
INDITEX OPENS FOUR BRAND STORES IN IULIUS MALL TIMISOARA é Fashion retailer Inditex (Industria del Diseno Textil) has opened four stores within Timisoara-based commercial center Iulius Mall, for Zara, Pull and Bear, Bershka and Stradivarius. The stores cover 3,200 sqm of retail space within the complex’s extended wing, which is set to open in H2, 2009. The mall will deliver a gross built area of nearly 178,000 sqm, including a new 95,000-sqm wing which will increase the mall’s shopping gallery from 244 to 300 stores. Inditex signed a lease agreement with Iulius Group in October 2008, when it rented five stores in Iulius Mall Iasi.
6
Four telecom operators in Romania already have a 3G license, with a fifth said to be interested
At least one more 3G license will be assigned by the end of the year, according to Catalin Marinescu, president of the newly reformed National Authority for the Management and Regulation of Communications of Romania (ANCOM). Currently, the operators on the local market who have a 3G license are Orange, Vodafone, Telemobil (Zapp) and RDS RCS. Cosmote, the third largest telecom operator locally, has not yet obtained a 3G license but has often expressed interest in doing so.
With a view to fulfilling the main priority of his mandate – increasing the number of broadband internet connections – the ANCOM president intends to re-launch the tender for the BWA licences and to finalize the preparations for the provision of 3G services in the 900-1800MHz band, as soon as possible. Moreover, ANCOM will evaluate the possibility of establishing incentives for operators to extend their area of provision within the existing 3G licences and will reform, in collaboration with
them, the 3G band, in order to create the conditions to grant at least one new licence, along with the corresponding financial compensation. The authority’s top priority this year is to expand broadband access. “The broadband penetration rate in Romania is half the EU average. In the century of speed and information, a connection to broadband internet at an affordable price should not be considered a luxury, but an essential. Therefore, the priority of my mandate is to increase the penetration rate,” said Marinescu. Among his other priorities will be to see that broadcasters switch to digital. “The digital switchover is both an obligation and an opportunity for Romania. If no clear development obligation is in place, there is a risk that broadcasters will fail to use the spectrum, and stick with cable and DTH, depriving Romanian users of digital transmission, which is of considerably higher quality, and of the chance to receive free-to-air programs. Therefore, one of the authority’s objectives is participating in the proper management of this transition process,” Marinescu added. Otilia Haraga
Global companies increasingly rush to freeze pay, cut benefits and reduce working week – survey
STOCKEXCHANGE
ANA PAN OPENS ITS SIXTH FRANCHISED UNIT NEAR BUCHAREST é Bakery chain Ana Pan, part of the Ana Group controlled by businessman George Copos, has announced it will open its sixth franchised unit in Romania, in Chitila. The unit will join the 19 existing bakeries and the five franchised units opened in Bucharest, Otopeni, Pitesti and Constanta. In 2008, Ana Pan registered a 30 percent growth in turnover due to unit expansion, reaching EUR 9.5 million in the first 10 months of 2008. An average investment in one unit is estimated at EUR 35,000-40,000, of which EUR 10,000 represents the franchise fee.
STOCKEXCHANGE
VASS LAWYERS PARTNERS ISTANBUL LAW FIRM é Law firm Vass Lawyers has signed a partnership with Istanbul-based Fora Law Office, following the company’s expansion strategy of working with foreign partners. According to representatives, Turkey is Romania’s major economic partner in the Balkans and Black Sea region, and the country ranks fifth for trade between the two countries. The Istanbul law firm’s representatives said that they have clients interested in investing in Romanian industries like pharmaceutical, energy and healthcare.
One more 3G license by the end of the year, ANCOM announces
A quarter of business organizations have moved to cost cutting, downsizing and slashing pay
Over a quarter of worldwide business organizations (27 percent) have decided to cuts costs, downsize and slash their reward programs, according to the third study conducted by global management consultancy company Hay Group. This is up from 15 percent four months ago. Workers in management
positions were most likely to be affected. The study, released last month, found that 36 percent of the 2,000 surveyed companies in 88 countries had decided to freeze salaries at their current levels, while 39 percent are preparing for much weaker business results than previously anticipated, up from just 10 per-
cent four months ago. When Hay Group conducted a similar study in March 2008, only 12 percent of organizations expected their business results to be significantly worse than targeted levels. However, eight months later, that number had jumped to 31 percent. In Romania, the local subsidiary of the global consultancy group found that 27 percent of local companies had reduced or completely axed their training and development budget in 2009. At the same time, 21 percent of all firms were reducing company travel, while 5.8 percent said they would cut overtime or the work schedule. In January of this year, 30 percent of firms said they were looking again at their bonus and benefit policies in 2009, and “would give serious consideration to the issues and potential solutions,” said Alina Popescu, reward information services manager at Hay Group Romania. Magda Purice BUSINESS REVIEW / April 13 - 19, 2009
TAX & LAW
Stop losing money: combating unwanted losses in electricity BRIEFS guide field teams to these loca- tions that losses will be eliminated; TAX&LAW and Put all the necessary organizationtions so that intervention can take By Kemal Özmen
CFE, CIA, CISA - director, dispute analysis & investigations, PricewaterhouseCoopers Romania and Southeast Europe
In times of economic crisis, money becomes even more valuable than it already is. This means cutting costs and keeping controls to ensure that revenue is 100 percent accounted for and collected. Electricity companies have networks through which they supply their consumers and they incur losses, some of which are due to technical reasons (age of technology, distance), and can be calculated using models. Improving the infrastructure decreases technical losses. There are other losses which represent the electricity we have purchased, but cannot invoice to consumers since we do not know where it has gone. These are called non-technical losses, and are calculated by eliminating all known losses. Let us look at the electricity distribution industry. The 2006 EUROSTAT figures show non-technical losses at 1.05 percent; i.e. 35,379 GWH. This means an overall annual impact of EUR 6 to 8 billion. It is not the producers, the regulators or the transporters that are losing this money, it is the distributors. While regulatory agencies allow for part of the technical losses to be reflected in tariff increases, there is no lifeline for non-technical losses. These can be attributed to defective meters or fraud. In the latter case, losses happen through meter fraud or illegal connections. In order to combat them, procedures for identification, quantification, evidence collection and recovery need to be in place, as well as dedicated organizational structures, which include data analysis and field intervention capabilities. Data analysis can be used to identify abnormal consumption patterns. These include: Differences between actual and historical consumption; Comparison of consumption by consumer segments sharing similar demographics; Seasonality comparisons; Matching anomalies to changes in the meter or reader, meter repairs or replacements, and tariff or scheme swaps. Results of the data analysis can be used to identify “suspect” locations, BUSINESS REVIEW / April 13 - 19, 2009
place. Once on site, the team will disconnect illegal connections, if any, gather evidence, calculate and invoice the damage, remove the meters and leave. They will need to be skilled in operational aspects and in self-defense, and have the right equipment to hand. This concept can identify meter fraud; however, for detecting illegal connections, data analysis needs to be combined with information related to the consumers’ connections to each individual point and line on the network. Thus, leakage areas can be identified. The result is a “heat map” based on individual energy balances at each point across the network. An important key is the integration of the heat map information with the billing and customer management systems. Field teams can also be guided by tip-offs received through customer call centers, fellow employees or technical service. Such information should be treated with the utmost confidentiality and anonymity. Experience has shown that the quickest way to implement the loss prevention capabilities within a company involves a roadmap with four steps, as follows: Setting a five-year loss reduction target, with reasonable expectations (e.g. reducing losses by 50 percent in five years); Performing a business case and cost benefit analysis given the targets; Planning and performing a dress rehearsal of the loss prevention concept within a certain zone for a certain period; and performing the actual rollout. While serving Romanian and international clients, we have learned many lessons, and I would like to share some of them with you here: Do not start with false expecta-
al and technical measures in place first; Check the quality and reliability of the data in the billing and customer systems; Keep all input channels to the field teams open; Ensure full compliance with national laws on property and trespassing; Resolve the fraud matter as early as possible, issue invoice on the field; Watch out for European unbundling laws: inter-company procedures and SLAs; and periodically compare results against goals and financials. Non-technical losses present a significant economic impact, but may also be a lifeline if you manage to recover them. Recovery can only be done by implementing loss prevention capabilities combined with quality data and information infrastructure. Kemal Özmen is the director responsible for PricewaterhouseCoopers' dispute analysis & investigations practice in Romania and Southeast Europe. He joined PricewaterhouseCoopers in 2008 after having spent more than 10 years at Big Four professional services and accountancy firms, accumulating valuable experience related to fraud investigations, dispute handling, process and internal controls work, enterprise risk management, as well as handling IT&C issues, specialized in energy, utilities, telecommunications, and financial services. Özmen obtained a Bachelor of Arts degree in Economics from Macalester College in the USA, and is currently the interim vice-president of the Romanian Association of Certified Fraud Examiners. Kemal has participated in numerous advisory projects in Southeast European countries, and has appeared as guest speaker at a number of local and international events. ■
OTOPENI AIRPORT TIPS TURNOVER TO SOAR 20 PERCENT IN 2009 é International airport Henri Coanda in Otopeni estimates a turnover increased of 20 percent in 2009 compared with 2008, to reach around EUR 86 million. The airport also foresees a possible decrease of 5 percent in passenger traffic, due to the financial crisis, to an average of 5 million passengers in 2009. According to airport representatives, the development of airport infrastructure and purchasing of land will start after the issuing of a zonal urban plan (PUZ) and feasibility study. METRO CASH & CARRY AND UNICREDIT TIRIAC BANK ISSUE COBRANDED CREDIT CARD é Metro Cash & Carry Romania, part of Metro Cash & Carry International retail network, has signed an agreement with UniCredit Tiriac Bank to issue a credit card aimed at Metro’s corporate clients. The credit line goes up to EUR 30,000, with a grace period of 50 days, according to the company. Maximum credit must not exceed 10 percent of the company’s turnover. The system, first rolled out for companies in Iasi and Craiova, will expand countrywide, according to bank representatives. MEDIA GALAXY EXPANDS NETWORK WITH BRANCH IN MILITARI SHOPPING CENTER é Media Galaxy, part of IT&C and electric household goods retailer Altex, has opened a new unit in the recently launched Militari Shopping Center. The store delivers 3,000 sqm, containing 30,000 IT&C and electric household products. Militari Shopping Center's commercial area also hosts anchors such as IT&C retailer Domo and a Praktiker DIY unit. French retailer Auchan is paying EUR 20 million to rent a 12,500-sqm hypermarket within the complex. The center’s commercial gallery comprises 60 shops and 16,000 sqm of GLA from a total of 51,400 sqm at an estimated cost of EUR 75 million 7
CALENDAR / WHO’S NEWS
EVENTS, BUSINESS AND POLITICAL AGENDA APRIL 14 é 09.30 – Microsoft Romania organizes event on Windows 7 in Bucharest
at Pullman Hotel, Sala New York Auditorium. é 11.00 – Cisco and UniCredit Leasing launch financing program Cisco
EasyLease at America House Center conference center.
APRIL 15 é 10.00 – 14.00- GS1 Romania Association organizes launch event for
the “Code of Good Practices in Scanning for Wholesale and Retail Sale 2009” at JW Marriott Hotel Bucharest, Galati room.
APRIL 24-26 é Executive coach Robert Dilts will be holding a workshop called “Iden-
tity Coaching”.
MAY 22-23 é eLiberatica, the largest international IT event takes, place at Politehnica
University in Bucharest.
Ford increases its share package in Automobile Craiova
LAURENTIU OBAE
The carmaker paid EUR 18 mln for the shares
Carmaker Ford, the company that controls the majority share package in Automobile Craiova, has paid EUR 18 million for the stake belonging to minority shareholder, the Romanian investment fund SIF Oltenia. After the deal, Ford will control about 95 percent of the company’s share capital. The transaction was settled at RON 17.50 lei per share, up 2.94 percent on the last price established 8
on the market. Ford has acquired 4.27 million shares belonging to Automobile Craiova, representing 22.56 percent of its share capital. Romania’s government approved a memorandum by which it will give the American carmaker the biggest guarantee of the last 20 years, EUR 320 million, to keep up investments in the Craiova plant, said Adriean Videanu, economy minister. According to the Romanian authorities, the aim is to help protect investments in the country following the car market’s decline and the credit crunch. Moreover, Romania's chamber of deputies approved on March 10 EUR 143 million in state aid for the Ford plant in Craiova, which must be used by 2012 for regional development. The carmaker purchased the plant in March last year and has committed to investing about EUR 675 million by the end of 2012. Dana Ciuraru
WHO’S FLORIN POROJAN was appointed GM of Franke Romania. He has over 10 years of experience in sales and management and has worked for various top companies on the Romanian market such as Wrigley Romania, LARO Distribution and Electrolux Romania. He is also the president of the Association of European Producers of Electronic Appliances (CECED) Romania, and a member of the management board of RoRec, the Romanian Association for Recycling. CATALIN MARINESCU was appointed president of the newly reformed National Authority for Management and Regulation in Communications (ANCOM), with a term of six years. He was previously president of the General Inspectorate for Communication and Information Technology. Marinescu graduated from the Faculty of Electronics and Telecommunications in Bucharest and has a Master’s degree in Management and Public Sector Reform from the University of Manchester, Great Britain. CORINA MARTIN was appointed president of the National Association of Tourism Agencies (ANAT), with a term that runs for two years. She is also the president of the Association for the Promotion and Development of Tourism on the Black Sea. RAZVAN CODRUT POP, historian and civil society activist, was appointed CEO of the Romanian association Think Tank. Pop is currently personal counselor to the minister of culture and the minister of justice. In 2006 he was development manager of the Property Fund. He is also a founding member of various NGOs such
NEWS as the Association of People for Art, and the Institute for Research and Valuation of Transylvanian Cultural Heritage in a European context. ANCA MARCU has recently joined Accenture as recruitment lead – delivery center network for BPO in Europe. She previously spent two years at Ozone Laboratories as HR director for Romania and Bulgaria. Before that, she worked for Vodafone for eight years. She started her career in customer service, then moved to human resources where she progressed from HR assistant to HR director. She graduated from the Bucharest Academy of Economic Studies and has also earned HR certifications. ADRIAN VASCU recently joined KPMG in Romania as a valuation services director. He will coordinate the valuation department at KPMG at a national level, as well as being the head of the Cluj office. He has more than 14 years of experience in valuation services. At present, Vascu is the president of ANEVAR (National Association of Romanian Valuers) and also a member of the board of TEGOVA (European Group of Valuers' Association). 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 Program (UNDP). He will advise both private companies and state institutions on accessing and administering financing, especially from the EU and International Financial Institutions. He will also give guidance on the formation of strategic partnerships between the public and private sector.
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 BUSINESS REVIEW / April 13 - 19, 2009
ANALYSIS
Forfeiting tax could bring price increases and even more tax evasion Recent tax change proposals – currently in the process of being updated by the government – include a forfeiting tax even for firms which post losses, and are intended to swell state coffers. But experts say they could instead lead to bankruptcies and rises in product prices. They could affect honest taxpayers more than the intended targets – tax evaders – who might find other ways to avoid paying, say pundits. By Corina Saceanu
COURTESY OF TAXHOUSE
Alina Timofti, partner, NNDKP Consultanta Fiscala
firms which may make a small income from, say, interest on bank deposits and not from operational activities, explains Rosca. Initially, a tax of 0.5 percent on all income (with few exceptions), but no less than RON 6,500 per year was to be applied to all such firms. Afterwards the government decided to apply a certain tax on revenues depending on the firm’s turnover. Special purpose vehicles, firms set up especially for selling or buying certain assets, like real estate projects, could also be affected if the measures are applied as they are. Shell companies usually do not have operational activities or staff. Timofti dismisses the reason given by the government – fighting tax evasion – as a cover for the need to boost the state budget. “Let's not forget, the IMF agreement involves certain commitments to increase state budget revenues” she adds. Tax revenues will certainly rise, but if firms also go bust as a result, the increase might not be that important, says Timofti. The proposed measures also cancel the facilities introduced in 2008 through the fiscal recognition of bookkeeping re-evaluation.
NO MORE VAT DEDUCTION FOR COMPANY CAR ACQUISITIONS The cancellation of VAT deduction on the acquisition of cars, included in the
Angela Rosca, managing partner TaxHouse
first draft of the proposals, will initially hit car vendors, who are already facing tough times due to the financial crisis. “The new Fiscal Code is aberrant, because it will favor the sale of secondhand cars on the black market, which will affect the sale of new cars. […] And the 30 percent deductibility of expenses is aberrant because it will also encourage the purchase of second-hand cars and repairs in unauthorized service units,” says Brent Valmar, GM of Porsche Romania. The measures would impose harsh restrictions on a market which has already dropped by 60 percent, and have the opposite effect of what's expected – swelling state coffers – says Mihai Halmagianu, director of the Audi brand in Romania. “It would encourage an increase in the black market, similarly to the 90s,” he says. Audi’s planned investments for this year, some EUR 25 million in expanding the dealer network and
Main fiscal change proposals é Companies with turnovers between EUR 12,000 and EUR 50,000 will pay
a tax of EUR 1,000, while those with a turnover between EUR 50,000 and EUR 100,000 will pay EUR 1,500 per year, under the proposal. Those with turnovers below EUR 12,000 must pay EUR 500 per year. é Companies will not be allowed to deduct the VAT on cars or car parts and can deduct only 30 percent of the VAT for car repairs, renting or operational leasing services. Amortization expenses will be limited to one car per management position.
SOURCE: TAXHOUSE, GOVERNMENT
BUSINESS REVIEW / April 13 - 19, 2009
COURTESY OF NNDKP
The increase in the tax burden for Romanian companies, especially SMEs, through the proposed forfeiting tax, a mandatory tax applied even if the company posts losses, as well as car purchases being made VAT non-deductible, is likely to drive up the prices of what the affected companies are selling. The measure, if applied as is, would take Romanian fiscal policy backwards, says Alina Timofti, partner with NNDKP Consultanta Fiscala. Worst hit may be good faith payers, who may post losses either due to the current economic environment or because they are making investments, she explains. The measure aims to make it harder for firms to avoid tax through concealing profits. But it could hurt upright firms instead. “Besides affecting honest taxpayers, the introduction of the forfeiting tax could drive the dishonest ones to find new means of tax evasion” says Angela Rosca, managing partner at TaxHouse. “These kind of situations should be improved through more efficient fiscal control measures, not through hardening taxation,” adds Timofti. The move could also conflict with wider rules. “The project infringes certain principles in the Fiscal Code itself and to an extent the EC treaty and some European Court of Justice decisions. It introduces discriminatory measures between various taxpayers and industries.” says Rosca. Although the government points out that France and Hungary have introduced a minimum mandatory tax, other countries have repealed them or reduced social contributions, in order to help SMEs, “all in line with the EC recommendations, in the same international economic context,” adds Rosca. In its current form, the tax has to be paid by start-ups, companies which have made significant investments not depreciated yet, those operating in industries with low profit margins, and inactive
training, could be hindered by the measures and would strongly affect businesses which have never delayed their payments to the state budget, he adds. The new measures will mainly hit companies in the automotive industry, small and large retail companies alike, distribution firms, leasing industry, companies with low profit margins, as well as firms in the services sector, as they might be required to pay higher taxes and would have to cover higher costs for their vehicle fleets, explains Rosca. “These firms are already being affected by the economic crisis. This kind of pressure will see an increase in sale prices to buyers and maybe bankruptcies,” she adds. The forfeiting tax practically imposes a minimum profit margin each company should post so as not to be liable, explains Rosca. But state representatives says some firms have been posting losses for too many years and that the percentage of those with large turnovers that do not post a profit is too high. “If a firm has no resources to pay a RON 600 tax, it means the owner has created the firm for nothing,” says Constantin Nita, the minister for SMEs, trading and the business environment. The government is trying to avoid companies adopting a free-rider approach, say its representatives. In 2007, 39 percent of the companies registered in Romania posted losses, although their total turnovers exceeded RON 134 billion. By the time Business Review went to print the government was still discussing further taxation changes. ■
9
COVER STORY By Corina Saceanu
LAURENTIU OBAE
Plenty of room at the inn: Bucharest hotels have been feeling the pinch since the financial crisis started to keep business travelers away from Romania
Bucharest sees emptier hotels but hopes for 2010 bounce back A drastic drop in room rates, which hotels have already put into effect on the Bucharest market, is not necessarily the way to boost occupancy, say managers and owners. With average prices down 7 percent in January this year, according to reports, and occupancy at lows, it will be a year of survival for local hotels. There is still business, but they need to work harder to get it. 10
These are not the best days for hotel managers around the world and Bucharest is no exception. A quiet and empty hotel translates into decreasing revenues at the end of the year, and the end of 2009 will find many hotels on the local market writing smaller profits, if any at all, on their balance sheets. Bucharest does not attract large numbers of leisure travelers, it is business people who fill the hotel rooms in the city. Last year, the beginning of a cut in business travel budgets was reflected in a drop in occupancy like nowhere else in the continent. Bucharest experienced one of Europe’s largest declines in hotel occupancy rates in 2008, down 19.6 percent to 57 percent, as dwindling consumer confidence, lack of credit and a declining business spend threatened the hotel industry worldwide, according to a report by Deloitte Touche Tohmatsu. If a 57 percent occupancy seemed bad news, the data from January this year brings even worse numbers: occupancy in Bucharest hotels dropped by 38 percent, to reach 34 percent of the same period of last year, according to a study by STR Global on 13 Bucharest hotels. True, January and December are never good months for the local hotel market, but the decline is still considerable.
FLEXIBILITY ON ROOM RATES BUT NO DRASTIC CUTS, SAY HOTELIERS Down goes occupancy, so too do prices. The average room rate in January this year dropped by 7 percent from 2008, the STR study reveals. The average cost of a hotel room in Bucharest was RON 391 in January, compared to RON 420 last year. The study covered 13 above three-star hotels in Bucharest. Slashing room rates is a tricky business for hoteliers. They all talk about flexibility in pricing, which is indeed translated into lower rates, but none wants to make the first move towards a drastic cut in prices, which would create a domino effect on the market and decrease revenues even more for everybody. “From November last year, the four- and five-star hotels lowered their prices significantly, sometimes almost to three-star level. This forced us to lower our rates as well,” says Jerry Van Schaik, the owner of the 16-room Rembrandt boutique hotel in Bucharest. “I don’t agree with this move. [...] I think giving more and betBUSINESS REVIEW / April 13 - 19, 2009
COVER STORY ter value to our guests is the way to react to an economy in recession, not to lower prices. How can you justify to your loyal guests in a year’s time that they have to pay double prices for the same room they stayed in before? It may be good for our guests on the short term, but it is not good for a healthy hospitality industry,” Van Schaik says. He does not have as many rooms to fill as Marten Schoenrock, who manages the 283-room Intercontinental hotel downtown Bucharest. “A little bit more flexibility on room rates is required these days. All categories need to be careful to protect their rates, as just dropping rates doesn't necessarily mean you'll get more custom. Business in general has been reduced, and reducing your rates on less traveling makes you lose on both rates and occupancy as well,” Schoenrock tells Business Review. There is quite a drop to be seen in the room rate, as well as in occupancy, he says. “The average room rate for the market is down, as a percentage, I would say, by 10 to 15 percent, a result of fewer business travelers coming to Bucharest,” says Schoenrock. Pundits think the fall is about 30 percent, but Schoenrock disagrees. “We do not predict a decrease in rates but a higher flexibility in terms of groups and big events that come together with a full package of services. It is already common knowledge that
cutting the rates will not create new demand . But in order to take your share of the market it is true that you have to be more flexible in terms of rates in these periods,” says Adrian Adam, sales and marketing manager with the Radisson hotel in Bucharest. “With little good news on the horizon, the tourism industry will focus on survival this year. While slashing room rates seems tempting, this is not a longterm solution. Hotels need to focus on service quality, innovative incentives and strategies that will differentiate
them from the competition,” adds George Mucibabici, chairman of Deloitte in Romania. “I read comments that the five-star hotels are hit the most and that threestar hotels are reaping the benefit because people prefer cheaper hotels these days. In practice, the five-star hotels dropped their prices and the threestar hotels were forced to join this price fall in order to stay competitive. The impact of this drop in prices and in occupancy is huge for small hotels like the Rembrandt,” says its owner.
LAST QUARTER THIS YEAR AND 2010 TO BRING MORE HOS-
PITABLE MARKET
Schoenrock of the Intercontinental looks optimistically towards the last quarter of this year, with hope it will bring an improvement in occupancy and activity in the city in general. Others find it harder to estimate when the market will recover. “As long as hotels depend mostly on the external market, for example on the multinational companies in Romania, it is im-
Occupancy and revenue per room fall elsewhere too é Three key markets decreased in
BUSINESS REVIEW / April 13 - 19, 2009
SOURCE: STR GLOBAL
occupancy by more than 20 percent: Prague, Czech Republic, down 33 percent to a 35.6 percent occupancy; Budapest, Hungary, down 28.9 percent to 35.1 percent in occupancy; and Lisbon, Portugal, down 21.4 percent to an occupancy of 41.5 percent. é Six key markets reported revenues per available room (RevPAR) decreases of less than 10 percent: Berlin, Germany (9.8 percent to EUR 51.13); Frankfurt, Germany (-9.6 percent to EUR 75.37); Vienna (-8.6 percent to EUR 49.54); Munich, Germany (-8.2 percent to EUR 56.74); Geneva (-6.1 percent to EUR 120.43); and Hamburg, Germany (-2.4 percent to EUR 60.50).
11
COVER STORY
LAURENTIU OBAE
LAURENTIU OBAE
Jerry Van Schaik. owner of the Rembrandt hotel in Bucharest
Marten Schoenrock, general manager of the Intercontinental hotel
possible to say when things will set themselves right. Other countries, where our business comes from, need to see that first, and only after that will the home market revive,” says Dina Litzica, PR manager with JW Marriott hotel in Bucharest. “When the 9/11 terrorist attacks happened, it took six to eight months for Americans to regain their confidence and start traveling again. This time is a little bit different,” she says. Intercontinental's Schoenrock agrees. “I was in Chicago on 9/11. That froze everything for hotels for a period of time, and it took around five to six months for the market to rebound. But in that case everybody knew it would be strictly a matter of time. Now it is uncertain, as there aren't any events in the past that can be compared to what we’re seeing right now,” says Schoenrock. Instead of complaining about bad results, hotel managers know they need to act, and act quickly, at least to minimize losses. “Our focus was always on international business travel, but this market went significantly down in the first quarter of 2009. We have changed focus to projects financed with EU and government money. The budgets for these projects have already been allocated for the whole year and the consultants and specialists working in these projects still continue to travel to Romania. Another market which we’re aiming at these days is domestic business travel – the businesspeople from Cluj, Timisoara and Iasi have to come to us,” says Dutchman Van Schaik. He has gone even further, making an appeal to patriotism: “I have contacted my Dutch network and called
Van Schaik. “There is still business, we just have to work a little bit harder for it,” adds Schoenrock, the Intercontinental GM.
‘SOMETIMES IT TAKES A CRISIS TO MAKE ONE MORE EFFICIENT’ Nowadays hotel managers are looking at their key indicators more often. “The feedback from our guests is reviewed and quality in general gets reviewed on a regular basis, these days maybe a little bit more than usual,” says Schoenrock. He looks at the revenues and at costs, such as salaries, so that they stay in line with the business, as well as at efficiency.
Residential turns into aparthotel é With the residential sales market ground to a halt, developers have found a
way to make use of their finished projects, and turned residential buildings into aparthotels. This was not necessarily a first, as it copied what developers have been doing in other countries, but it was a rapid reaction to the market. Such a move gave birth to Phoenicia Aparthotel in the Unirii area of Bucharest, a 55-apartment development by businessman Mohammad Murad, owner of the Perla Majestic group of companies. The four-star aparthotel was initially planned as a block of flats, with construction works having started in March 2006. Last year, however, the developer decided to make interior modifications to change the building into an aparthotel. It is the second project of this type, after the Phoenicia Aparthotel in Baneasa opened at the beginning of last year. The developer plans to add a third such project, also initially destined to become residential, Phoenicia Residential Apartments, a 40-unit scheme in Baneasa. é These project join several existing ones on the Bucharest market. Centre Ville has been running its 300-apartment aparthotel for several years. A new additional to the market will come with the development of the mixed Metropolis Center project, which will include a Starlight Suiten Hotel aparthotel project.
SOURCE: BUSINESS REVIEW, COMPANIES
12
upon their loyalty to a fellow countryman to sleep in ‘their’ Rembrandt Hotel. The good thing is that the economic circumstances have driven us to diversify and to be more creative,” says Van Schaik. Smart innovation, a personal approach to hospitality combined with the necessary cost reductions will help these hotels through this tough period. “I hope in 2010 we will be back on track,” he adds optimistically. In the first quarter of 2009 his hotel had a 52 percent occupancy rate, compared to 77 percent last year. “For the entire year we expect a drop off of 20 percent, but we are working hard to reduce this to only 10 percent,” says
“Sometimes it takes a crisis to make one more efficient,” he says. “We are looking at a few more cost efficiency measurements now than in the past. But we can't spend half a day analyzing reports when customers need our attention,” says Schoenrock. Forecasts no longer rely on last year's evolution. “We are trying to have a realistic forecast. We don't work with super-worst scenarios, every month we look at trends from the last months and apply them. One can't just take trends from the last few years and assume those still apply, especially since 2007 was a very good year on this market. Those indicators don't work anymore. What works is what you have right now, the recent past,” the Intercontinental GM adds. The food and beverage and conferencing segment of local hotels' business, an important part of their budgets, hasn't necessarily seen a drop in rates. But it has seen a drop in the number of attendees at such events. “We have seen a fall, not from the price point of view, but in the number of participants, which has possibly dropped from 200 attendees at an event to 120 now, for example,” says Schoenrock. “People still get married, there are still events going on. Of course, in the past people were staying three nights, now maybe they stay only two and don’t spend the extra night, but the meeting still takes place,” he goes on. The five-star hotel he manages is undergoing a renovation process which should bring around 100 additional rooms by the end of the year and an entire floor of conference facilities by mid-year. corina_saceanu@bmg.ro BUSINESS REVIEW / April 13 - 19, 2009
Estates&Construction
MARKET
APRIL 13 - 19, 2009 / VOLUME 14, NUMBER 13
BUSINESS REVIEW FORUM
Manage your business environment !
JLL local office keeps same size and hopes for similar results to 2008
COURTESY OF JLL
Charles Krick, managing director of Jones LangLaSalle in Romania
The local office of real estate consultancy firm Jones LangLasalle expects to posts similar financial results this year to last year, and doesn't envisage axing staff locally as it doesn't have any exposure on the residential segment. “For this year we are fairly confident we can do as well or even a little bit better than we did last year,” Charles Krick, managing director of JLL in Romania, told Business Review. “We are trying to keep our status quo. If we see the opportunity to bring new people on board, we will take it. We have actually hired someone recently, but it has to be opportunistic led. We
have been able to maintain the status quo because on the residential side we haven't been involved,” says Krick. But could the difficulties of the local market persuade some foreign names to pull out? Some smaller international consultants are likely to give up on their Romanian activities, Krick believes. “For the larger consultants, it's also possible, but there really needs to be some additional tough times for that to happen. There are some groups out there with difficulties in funding themselves. If the crisis deepens, these groups with funding issues might need to potentially
pull out from some markets in order to save the firm, but it will not be due to losing so much money here, rather another issue in their home markets,” Krick explains. The firm has seen demand on the valuation and office and retail leasing side, as well as on project management, at a similar level to last year. “We’re seeing a couple of leasing deals a month on average, ten to 20 office and retail leasing deals – usually these are weighted towards the end of the year, as the second half of the year is when we do most of our deals,” says Krick. Leasing deals typically range from 500 to 2000 sqm per deal, he adds, saying the firm saw leased areas dropping in the first quarter of the year. On the valuation segment, with demand coming from both local and foreign developers and investment funds, JLL has seen local portfolios dropping in value by 10 to 25 percent on average. “It could be higher or lower, depending on each case,” says Krick. “The drop in portfolio values is probably comparable across the CEE region, but it depends on the perceived level of risk of each country. Those countries perceived as being more risky have probably seen property value drop by a larger percentage.” Romania is perceived as riskier than Western markets and even other CEE countries, because the real estate market here is not yet as developed as in the rest of the region. “Once the economy starts to grow in Romania we should see some positive effects of that on real estate, and we want to make sure we are here when the market starts to pick up,” Krick concludes. Corina Saceanu
ESTATES & CONSTRUCTION MARKET
Perfect Casa: days of customers queuing are long gone and won’t be back any time soon The volume of intermediated transactions in H2 of last year was down 20 percent on the same period of 2007 for Perfect Casa, which reflected the downwards trend all over the local real estate market. “By the end of the year, many of us may have re-thought our business, alloted more attention to the training of real estate agents, and put more effort into transactions, because those times when the telephone was ringing and customers were queuing are gone for a very long time,” says Jeni Dragomir, president of Perfect Casa. At the end of last year and in the first months of this year, although the residential market got stuck, several deals were sealed on the luxury residential segment. “There were few transactions, but they were valuable, because prices on this segment will never go below a certain threshold and because buyers have liquidities,” says Dragomir. Sale prices on the luxury residential segment have dropped from an average of EUR 3,500 per sqm in March last year to some EUR 2,500 nowadays, although there have been few transactions. The current prices are not likely to
decrease, she thinks, and by year-end, listing prices will be closer to sale prices. Office leasing was also a dynamic segment, because many companies have relocated or started to renegotiate their rents. “The land segment was indeed the most affected because developers don't buy land anymore. Land prices have not only dropped, but pricing on this segment has become chaotic, with a big difference in listing prices between adjoining land plots,” says Dragomir. “Obviously, like any other company in the real estate market, we will have a difficult year; those who say otherwise are not realistic. It is very hard to estimate our turnover for this year: there are many variable we don't know, nobody knows them, there are many evolutions which depend on the international frame set, on financial measures the local government might take,” she says. “But I don't think it will get much worse, which is a good sign: when there's no place to fall, you stay there for a while, and then the only way is up,” says Dragomir. Corina Saceanu
Saint-Gobain Romania ups turnover to EUR 214 million in 2008 Construction materials producer Saint-Gobain Romania, which has nine companies on the local market, posted a turnover of EUR 214 million in 2008, a boost of 17 percent compared with the previous year’s result. In 2007, the company registered a turnover of EUR 218 million. The company said it had registered an export value of EUR 56.2 million in 2008, with the major targeted markets in the Balkans, Black Sea region, Middle East and Western European countries. Last year, the company invested some EUR 26 million on the Romanian
market, with its main focus on the new equipment installed at the Calarasibased glass factory operated by SaintGobain Glass Romania. “In 2009, we will target out attention on consolidating our market position and our efficiency on each segment. If the marker evolves, we will restart our investment strategy,” said Olivier Lluansi, general manager of Saint-Gobain in South-Eastern Europe. According to him, Saint-Gobain Romania pronounced the last quarter of 2008 as weak, below its estimations. Magda Purice
Prices of old apartments lose EUR 200 per sqm countrywide in Q1 freefall, Bucharest worst hit The cost of homes in Romania fell by an average of EUR 200 per sqm in all Romania’s big cities in Q1, with Bucharest seeing the highest correction, of EUR 300 per sqm. Supply and demand figures indicated that the sale price of old apartments have fallen continuously since the beginning of 2009, but despite the drop buyers are still not being lured back into the market. In Bucharest, two-room flats built before 1990 lost around EUR 343 from the January-posted sales price of EUR 1,880 per sqm to reach EUR 1,537 per sqm. For instance, a 54-sqm two-room apartment in the capital now goes for EUR 50,000 (for locations such as Drumul Taberei, Giurgiului, Giulesti, Gorjului) up to EUR 83,000 sqm. However, buyers still consider the prices excessive, according to real estate agencies.
Prices are also tumbling in cities as Brasov and Cluj-Napoca, with apartments losing around EUR 200 per sqm from their value in January. A two-room apartment in Cluj-Napoca now costs about EUR 67,000, with some areas, such as Zorilor, demanding even lower prices, of EUR 57,000. In Brasov the falls and prices are similar. Timisoara is now seeing sales prices down to a current EUR 1,290 per sqm, with apartments in some areas up for sale for EUR 60,000 or even EUR 50,000. Homes in Iasi cost even less, with flats on the market for EUR 1,070 per sqm, down from EUR 1,298 in January. An apartment here can go for as little as EUR 35,000, according to residential portal www.imobiliare.ro. Lack of demand means that prices will continue to slump. Magda Purice
BNP Paribas Real Estate Romania manages 500 sqm leasing contract for Autoitalia Group In a transaction mediated by BNP Paribas Real Estate Romania, Autoitalia Group has leased 500 sqm of retail space in Alexander Center, for a new auto showroom. The project, which will host the new Infiniti showroom, was developed by Loi, for a total investment of EUR 15 million The building provides approximately 6,200 sqm of rentable area, 3,350 sqm of offices and 2,800 sqm of retail space. The office block has four levels with a total rentable area of 6,600 sqm and 74 parking spaces, according to the draft. Loi is owned by Greek businessman Spyros Loizos, who controls a 60 percent stake, and Greek company Loimac, which carries out industrial car imports in Romania. 14
According to a report by BNP Paribas last month, the office market in Bucharest is experiencing the negative effects of the economic downturn manifested in declining rents and leasing activity. Although the segment performed remarkably well in the first semester of 2008, market fundamentals have been softening at a moderate pace especially since Q4. The current real estate market situation creates demand from companies that are currently locked into rental contracts signed a while ago, which now exceed the current rental market value. These tenants are trying either to renegotiate their ongoing lease or obtain a better quality for the price they pay in other buildings, the report says. Magda Purice BUSINESS REVIEW / April 13 - 19, 2009
ANALYSIS By Dana Ciuraru
ministry’s new plans. According to Videanu, the new firms
WHO IS LINES?
MEDIAFAX
Nuclearelectrica, Romgaz and Electrica will not be include in the
“We have to restructure the energy production sector in order to have two or even four profitable national energy companies, which will put Romania’s energy potential to good use. The restructuring process will create the performance premises for everything related to energy sector in Romania,” said Adriean Videanu, the economy minister, recently. The Romanian official’s statement comes as a surprise to energy market players, as all speculation surrounding the national energy company seemed to be settled at the end of last year. On October 8 of 2008, the Romanian government inked an emergency ordinance approving the formation of a national energy company. According to the document, the national power entity, with a total capacity of 10,000 MW, would comprise the state-owned hydropower producer Hidroelectrica, electricity distributor Electrica and the power complexes in Rovinari and Turceni. Romanian officials estimated at that time that the value of the national energy company would be between EUR 20 and 24 billion, and would reach an operating profit of EUR 800 million by 2012. Moreover, the authorities even had plans to list the company on the stock exchange in the next two or three years, with about 25 percent of the shares. The economy minister has now made a 180 degree about turn in the strategy for this project which, according to the statement made five months ago by government officials, was expected to become operational in March this year. In brief, new government, new ideas, new experiments, no concrete results. Videanu has now set another deadline. “This strategy must be discussed with each company from the energy production structure. At the end of this year, I estimate that these companies will be fully operational,” said the minister.
Bridge over troubled waters: the Economy Ministry has gone back to the drawing board over the CNE
One CNE or four CNEs? That is the question... The bigwigs of the Economy Ministry see another future for the national energy company (CNE). Minister Adriean Videanu has announced he is abandoning the formation of a national energy company approved in October last year, and now plans to form two or even four national energy companies. The big change:
should become operational in October, when the presidential election takes place and things are about to change again. BUSINESS REVIEW / April 13 - 19, 2009
LEFT ON THE SIDE-
Although, as the architect of the new plan, he might be expected to have details about the several national energy companies, the minister was unable to give any clarifica-
tion as to which state-owned companies would be included in the restructuring process. He stated only that he would consider the development of these businesses by public-private partnerships and joint ventures. However, Videanu’s reticence to give details has not presented speculation on the market about the constitution of the two national energy companies. One, rumor has it, would be formed of Portile de Fier, Electrocentrale Bucharest, Mintia thermo power plant, Paroseni, Deva, Autonomous Company for Nuclear Activities (RAAN) and Compania Nationala a Huilei. The other would consist of Lotru, Valcea and other hydro power plants, the three energy complexes Turceni, Rovinari and Craiova and Societatea Nationala a Lignitului Oltenia (SNLO). Things might look good on paper, but it is worth remembering that some of these companies have a lot of work to do. For instance, Complexul Energetic (CE) Turceni will be forced to close units three and six if the company does not complete its EUR 120 million investment in environment measures by January 1, 2010. One thing is for sure: stateowned companies Nuclearelectrica, Romgaz and Electrica will not be included in the new plans of the Economy Ministry. “The decision to exclude Electrica was taken in order not to discriminate against the most important foreign energy groups with operations on the local market, which have acquired only energy distribution companies and have no production capacities which are controlled by the state,” market specialists told Business Review. This new project will probably be analyzed next month and, if all goes smoothly, the companies are expected to be operational in September-October. Market specialists are skeptical, as around the time of the new deadline given by the Economy Ministry, Romania will have to face another challenge: presidential elections. It is unknown which parties will form the majority in Parliament at that time. What is also unsure is whether the Romanian authorities will manage to make good on their plans, or whether this new idea will join the others in the waste paper bin. dana.ciuraru@bmg.ro 15
FILM REVIEW
FILMREVIEW: Seven Pounds
Taking a pounding: Rosario Dawson plays the love interest who is literally heart-broken
In the UK, seven pounds (RON 32) is about what you’d pay for the average cinema ticket. Here, unless you are rich or foolish enough to frequent Bucharest’s costliest multiplexes, the price is thankfully a lot less. This means that when you find yourself watching a truly dire movie, at least you’ve only wasted your time, not your money. At points, Seven Pounds feels like a truly dire movie. At other points, it feels like brave and original filmmaking. What other picture starts with the main character’s suicide? Proceedings get underway with Will Smith (erstwhile Fresh Prince of Bel Air and rapper, now serious artist) in a motel room, on the phone to the emergency services, reporting his own suicide. So far, so intriguing. Is it a cry for help? Does he hope to be
16
saved? What has driven him to such a desperate act? The film then flashes back to fill us in on prior events. We see Will going about his duties as a tax inspector. At this point, you might be thinking that this isn’t going to make for a very exciting film, and maybe he should get back to saving the world from aliens while delivering witty one-liners. But wait. This is no ordinary tax inspector. Instead of poring over balance sheets with a calculator, Will becomes part stalker, part agony uncle to his tax defaulters, dividing them neatly into deserving and non-deserving of tax breaks. If they are exceptionally pretty young women, like Rosario Dawson, he also dates them. It doesn’t seem a particularly professional way to run the Internal Revenue Service. But
there is more than it seems to Will’s cavalier execution of his obligations. All of the debtors happen to be seriously ill. And in between visits, Will spends a lot of time looking out to sea in a troubled manner, shouting out seven names in anguish and suffering flashbacks of a car crash and him frolicking on the beach with an attractive woman. He also phones up a blind call center worker (Woody Harrelson) and abuses him, while giving away most of his possessions. I did say it was original. Slowly (the film lasts over two hours) the pieces of the jigsaw fall into place, and Will’s mission becomes apparent. Literary-minded viewers will at this point recognise the significance of the title, which is a Shakespearian reference to The Merchant of Venice and Shylock’s “pound of flesh”. You might not readily associate Shakespeare and Will Smith – although they do of course have the same first name and same initials. This is another incongruity of a thoroughly incongruous film. Seven Pounds is part drama, part romance. The best bit is the drama. The story really is quite unusual and at times shocking. With a puzzle at the heart of the narrative, it doesn’t spoon-feed its viewers as much as you might expect. That said, this is Hollywood – the puzzle is not exactly Rubik’s Cube-like in its fiendishness (car crash, fiance who is no longer around, Will looking tortured with guilt...
Hmm, what could have happened here?). Melodrama, cringe-worthiness and overblown sentiment abound, particularly in the romantic subplot, and the film is often guilty of taking itself very seriously indeed. But since the lowbrow start to his career, Will Smith has become a competent and convincing actor, and he acquits himself well enough in the part of the enigmatic tax inspector. Harrelson is a believable blind man, and Dawson makes the best out of what is, despite the serious subtext of her illness, a stock love interest role. Despite the film’s many flaws, the end is quite touching, though I’m still glad I didn’t pay seven pounds. Debbie Stowe Director: Gabriele Muccino Starring: Will Smith, Rosario Dawson, Woody Harrelson On at: : Cityplex, Hollywood Multiplex, Starplex, The Light
Where there’s a Will: Smith seeks redemption
BUSINESS REVIEW / April 13 - 19, 2009
LAURENTIU OBAE
EVENTS The first edition of the Spring Retro – Parade on the Wine Road, which showcases old collector’s cars, took place at the end of last week. Every year, the members of the Retromobil Romania club present their classic cars. While the event was in previous years a static one, this year the organizers decided to do things differently. So, 46 vintage cars belonging to members of the Retromobil club, whose honorary president is King Mihai of Romania, were showcased in the Aviation Museum. Twenty-eight of them then took to the road to a location 77 km from Bucharest. The route they took was called The Wine Road, a tourism project with great potential for the wine tourism industry which has so far been neglected by the authorities.
A picture exhibition that is part of an international program for the promotion of human rights called “Speak Truth to Power” will open in Carrefour in Baneasa Shopping City Bucharest in the presence of its initiator, KERRY KENNEDY (in pic). The exhibition showcases 50 portraits of important defenders of human rights all over the world interviewed by Kennedy. Their pictures were taken by Pulitzer prize-winning photographer Eddie Adams. The subjects are both renowned names in human rights such as Nobel Prize winners the Dalai Lama, Archbishop Desmond Tutu and Elie Wiesel, as well as lesserknown activists, such as environmentalist Wangari Maathai of Kenya and abolitionist leader Juliana Dogbazi of Ghana. The exhibition will run until April 23. The exhibition has traveled from the US to Greece, London, Madrid, Barcelona, Sydney, Helsinki, Rome, Seoul, Florence, Mantua, Johannesburg, Cape Town and Doha. Fourteen re-mastered albums released by British band the ROLLING STONES between 1971 and 2005 will go on sale in Romania from May, according to the Universal Music label. The albums that will be released, in a remastered format, are "Sticky Fingers" (1971), "Goats Head Soup" (1973), "It's Only Rock 'n' Roll" (1974) and “Black And Blue" (1976). June will see the launch of classics such as "Some Girls" (1978), "Emotional Rescue" (1980), "Tattoo You" (1981) and "Undercover" (1983). Finally, the remaining albums "Steel Wheels" (1989), "Voodoo Lounge" (1994), "Bridges To Babylon" (1997) and "A Bigger Bang" (2005) will be out in July. Rolling Stones played in Romania in 2007 in front of approximately 45,000 fans.
BUSINESS REVIEW / April 13 - 19, 2009
Bike rental center Cicloteque has reopened with the coming of spring for those who want to hop on a bike and dodge the heavy Bucharest traffic. Cicloteque places at the public’s disposal 100 bicycles and the necessary accessories such as protective helmet, gloves and knee pads. The bikes can be rented through subscription, for those who wish to keep them for a longer period, or just by paying a fee for several hours’ use. Since it was launched, Cicloteque has managed to attract around 2,000 customers, out of whom 200 are subscribers and the rest occasional users. Cicloteque was first opened last year by the MaiMultVerde NGO and UniCredit Tiriac Bank.
Two well-known American rappers, Fat Joe and Busta Rhymes, will perform in Romania, according to local news wire Mediafax. BUSTA RHYMES will perform at the seaside resort of Mamaia, while Fat Joe will play in a Bucharest club on April 24. Currently, Fat Joe, who has been a name on the rap stage since the 90s, is working on a new album. He has collaborated with numerous artists such as Ja Rule, Ashanti, Nelly, Jadakiss, R. Kelly and Eminem. Busta Rhymes, who is well known for his unique humorous style, already has a new album coming out this year called "Back on My B.S."
A total of 107 works of classical, modern and contemporary fine art from 80 of the most renowned Romanian artists will be auctioned by Artmark on April 16 at the Radisson SAS Hotel. Works by painters Nicolae Tonitza, Nicolae Grigorescu, Corneliu Baba, Stefan Luchian and Ion Tuculescu will be up for grabs. Prices will start from EUR 50,000 for some of the paintings. Before they go under the hammer, the works are being displayed in the foyer of the Atlas room of the Radisson. The highest price that a work has commanded at Artmark is EUR 120,000, for “The Girl in Pink” by Nicolae Tonitza.
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EVENTS
Romanian designer CATALIN BOTEZATU (pictured above with Chang S. Oh, managing director of Mega Designer Outlets) will open the first factory outlet store within MDS. The store will have a surface of 200 sqm and include all the designer’s clothing lines – couture, prêt-a-porter and lingerie. Botezatu pronounced the store “a good solution for those who, even in difficult economic conditions, remain faithful to quality products and luxury brands” which “addresses those who want exclusive products at lower prices than in the center of town.” Botezatu, who works with German fashion brand Quelle, presented on April 7 a collection of bathing suits, conceived especially under the MDS brand.
Protests have raged in the Moldovan capital Chisinau, after the Communist Party won elections in
European Film Festival takes place in four Romanian cities
the country. Expatriate Moldovans living in Bucharest organized meetings in the Romanian capital
One of the most notable annual events in Romania’s film calendar, the European Film Festival, will take place between May 8 and 31 in four cities. During this period, 37 movies from 24 countries will be screened in Bucharest, Brasov, Timisoara and Iasi, according to a newswire. In Bucharest the 37 productions
too, to show their support for their compatriots. The protests escalated to diplomatic level as
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can be seen between May 8 and 17. This year, the festival’s honorary ambassador will be Romanian director Marian Crisan. Previous editions saw this position being held by other important Romanian directors such as Cristi Puiu, Corneliu Porumboiu and Cristian Mungiu. Otilia Haraga
Moldovan state representatives blamed Romania for the unrest. The Moldovan authorities ordered the Romanian ambassador to Chisinau to be expelled and said Moldova was considering re-introducing visas for Romanians. Romanian president Traian Basescu said he would address Parliament on the foreign policy issue this week.
BUSINESS REVIEW / April 13 - 19, 2009