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Vol. 7, No. 6, July 2011
The magazine for informed internationals
Highway saga A bumpy ride to Romania’s road infrastructure
politics
economics
business
city life
Vol.7, no. 6, July 2011
Mitsubishi i-MiEV dealer M Car Trading and the Romanian National CIGRE Committee have inaugurated the country’s first charging station for electric cars. The public terminal – installed at Transelectrica’s headquarters – permits access through a personalized card. The i-MiEV, available in Romania since March this year, was the first car to be charged in the station and was tested by Laszlo Borbely, the environment minister
16
White goods go upmarket White goods manufacturers hope discounts and posh appliances will bail them out
32
Discount detonation Discount websites have exploded in Romania. But is the bubble about to burst?
40
Business savoir faire French firms are saying ‘allez’ to more local investments
6. Wait goes on
47. Franc talk
Romania’s entry to Schengen delayed by Dutch opposition
Swiss investors keep watch on the local market
9. Wind of change
51. In Focus
The EBRD and IFC are stumping up EUR 115 for the Cernavoda wind farms
We test-drive Ford’s new compact model on the twisting roads of Austria
11. Healthy investment
52. Waterworks
A group of doctors has opened the EUR 13 million Delta Hospital
Apa Nova’s GM talks about what investments his firm has on tap
36. American idols
55. Going green
US giants active locally share their investment plans
Ploiesti West Park is to feature a green industrial building for SMEs
editorial
306 Calea Mosilor, 56 Bl., A Staircase, 2nd Fl., Apt. 7, 2nd District Bucharest, Romania www.thediplomat.ro Publishers Adrian Ion adrian.ion@thediplomat.ro
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The Diplomat July 2011
How the small became big One of the hot topics of recent weeks has But some are ignored from the start, been Romania’s potential territorial re-di- such as the opposition. Playing Devil’s advision. But nobody knows the real reasons vocate, I wonder: is one single idea from all why the idea was made the subject of public of those proposed by Social-Liberal Union (USL) representatives a good one? Appardebate... ently not, since proposals that are comproWhat are we to expect from such an mises are made for a minority. And so the administrative revolution? Will it really majority comes to submit to the minority. make budget savings? Will we be able to attract European funds more easily? Under Exactly the opposite of what’s normal in the new system would it be easier for the civilized countries. Meanwhile the 8 +2 offer was refused. current ruling party to maintain power after the next elections? Or it is simply a diver- For now. Is that good or bad? Or to twist the sion topic thrown by the president for us question: for whom is it right and for whom to chew, to fill the papers and the internet wrong? Unfortunately it is almost rhetorical with comment and generate breathless talk – or shall we use the current buzzword of shows on this topic? “maximal” – that we Romanians are the ones Perhaps it’s a little of each. But what who are losing as the worst decision is no decision. Things stay the same and, as the is incomprehensible is how on any subject involving the future of this country – the re- old Romanian saying goes, all the discussions that took place were just a waste of division issue being one of great importance everybody’s time. – the ruling party can never reach common Unless the minority comes up with its ground with the opposition. own idea. But considering that even some It is incomprehensible how the president – who should be the mediator between the people in the ruling party have voiced their state powers, according to the unchanged skepticism on the project itself, we can conConstitution – is the one who adds fuel clude that the idea was thrown open without to the fire and hardens one player against thorough preparation or proper analysis by each other. Rather than working towards specialists. consensus, the pride and personal animus Whatever solutions and compromises – which exist without a doubt – deepen fur- are made in the near future and whether the ther, and the goal seems not to find the best country will be reorganized or not, it seems solution but for each camp to impose their to be just another topic kicked around by ideas. Whether good or bad. people who are playing with the country’s I wonder how they reached the “maxi- future. “After us the deluge...” ■ mal solution” 8 +2. Why not 9 +2? Or 7 +2? It feels like the politicians are playing Monopoly with the country while we watch from the sidelines and see how our country – and future – is being carved up.
politics Mayors to be elected in only one poll
Mayors will be elected in only one run-off, after the Chamber of Deputies approved the new law with 174 votes favor, 110 against, and 3 abstentions. The opposition deputies slammed the legislation, accusing the ruling party of seeking to obtain mayoral posts through bribery. In return, the democrat-liberals voiced their support for the law, pointing out that mirror elections are required both for mayors and presidents of county councils. The only exceptions from the law will be situations of second ballot. The law, devised by some PDL and PSD MPs, had previously been rejected by the senate.
Sebastian Lazaroiu named minister of labor
Former presidential counselor Sebastian Lazaroiu is the new minister of labor, government officials have announced. Lazaroiu was proposed by the Romanian PM Emil Boc, who has temporarily assumed the position. Lazaroiu gave up his position of presidential counselor on April 28 through a decree signed by the President. He said that he wanted to dedicate to political analysis and did not want his work to be associated with the president. In April, former labor minister Ioan Botis resigned amid allegations of a potential conflict of interest.
Italy promises to eliminate restrictions for Romanian workers
Romanian President Traian Basescu received Italian Prime Minister Silvio Berlusconi, who assured the local authorities that Italy would look for ways to gradually eliminate restrictions for Romanians working in the country. The Italian premier praised Romania’s accomplishments in meeting the Schengen Area conditions and reiterated his declaration of support for the country’s joining the zone this year. In turn, President Basescu expressed his support for increasing Italian investments in Romania, in sectors such as energy, infrastructure and agriculture. The Italian Prime Minister spoke about the positive role of the Romanian community in Italy and the Italian business community in Romania in ensuring the growth of the two states.
The Diplomat July 2011
The Netherland delays Romania and Bulgaria’s Schengen entry Romania and Bulgaria’s access to the Schengen Area has been pushed back by a year by the Netherlands’ decision to refrain from voting in the European Parliament. Under European Union (EU) rules, a unanimous vote is required to add new members to the passport-free zone. Dutch officials said they would decide whether Romania and Bulgaria should join the area in 2012, and until then the two countries would remain under observation, to see if they are able to secure their borders and fight corruption. The announcement came on June 9, just one day after the European Parliament had voted in favor of Romania and Bulgaria’s entry to the Schengen Area. The Netherlands’ reluctance is also shared by countries such as France and Germany, which have questioned the Balkan neighbors’ ability to fight corruption, thereby undermining their capacity to secure their borders against illegal immigration and trafficking. The governments of other EU member states are also waiting for the European Commission’s report on reforms in the fields of justice and the fight against corruption implemented by the two countries, due to be made public in July. Also, according to Jean-Dominique Nollet, chief of Europol’s Analysis Unit, extending the Schengen Area to include Romania and Bulgaria might encourage illegal immigration through the Greek-Turkish border. Meanwhile, Romanian officials remain
No Schengen access for Romania
optimistic that the country will get the nod by the end of this year. Prime Minister Emil Boc recently said that he hopes that by autumn Romania will be given the green light to join the Schengen Area in October. He added that there was also the option to join in stages. The Schengen Area consists of 26 member states, four of which are not members of the EU. ■
CCR pronounces draft law to revise Constitution partially unconstitutional The draft law to revise the Constitution submitted by Romanian President Traian Basescu on June 9 contains several amendments that Romania’s Constitutional Court (CCR) judges found to be unconstitutional. The judges have pronounced unconstitutional parts of the draft on the limitation of the immunity of MPs and ministers and the removal of the presumption of legality regarding MPs’ earnings. The CCR also rejected a proposal to allow the appointment of someone who is not a judge or a prosecutor to head the Superior Council
of Magistracy, and said it was unconstitutional to remove legal control over the tax and the budget policies. In response to the CCR ruling, Prime Minister Emil Boc said that it was only a lost battle, not a lost war. He also called the CCR’s decision “strange” and accused the judges of applying double standards now and in 2003, when parliamentary immunity was also restricted. The revision of the draft law, along with the Legislative Council’s opinion and the CCR ruling, will be sent to Parliament to be debated and voted upon. ■
politics Hospitals to receive financing according to rank
Hospitals will receive financing according to their ranking, which means that larger facilities from more important regions will get more money, Cseke Atilla, minister of health (photo), has announced. The minister said that it was unfair for large hospitals such as those in Cluj and Iasi, which are important regional centers, to receive financing for only 68-69 percent of their capacity as in 2010, while smaller hospitals obtained 90 percent of state budget funds, seeing as patients are frequently sent to large hospital units. “There will be a certain type of financing for every class of hospitals, with first class hospitals getting as much as 90 percent,” said Cseke Atilla. The minister added that local authorities needed to get involved in changing the hospital system as several hospitals do not have even a single scalpel. According to the minister’s data, additional funds of RON 500 mln are needed for the reorganization of the Romanian hospital system.
Senate passes law to ban smoking in public spaces
A law that completely bans smoking in enclosed public spaces and institutions, restaurants and bars, proposed by SocialDemocrat deputy Manuela Mitrea, was adopted by the Senate on June 15. The new legislation entirely outlaws smoking in enclosed spaces, but permits it on terraces as long as they are sectioned off from their surroundings by a wall. However, the senators passed a version of the law amended by the Health Commission, proposed by PDL senator Tudor Udristoiu, which allows smoking in bars and restaurants exclusively for smokers over 18 years old. The law was passed with 58 votes in favor, 29 votes against and 5 abstentions. The final decision on it will be made by the deputies.
The Diplomat July 2011
Romania postpones eight‑county reorganization plan Romania’s ruling coalition has decided to postpone a decision on the country’s administrative reorganization as the Hungarian minority party, the UDMR, which is part of the coalition, rejected all the proposals of the ruling Democratic Liberal Party. The UDMR, which represents the interests of about 1.4 million ethnic Hungarians, does not want the reorganization issue to spark a political crisis and would rather put the issue on hold and discuss it again early next year, said UDMR leader Kelemen Hunor, according to media
reports. Democratic Liberal Party vice-president Roberta Anastase said the coalition would set up a commission to look into reorganization issues this fall, as the Government continues decentralizing institutions across the country. Romanian President Traian Basescu asked the Government to consider dividing the country into eight counties or seven counties and Bucharest, as the current administrative organization into 41 counties favors corruption and hinders the absorption of EU funds. ■
Government approves formation of ANAF tax police The Romanian Government has authorized the establishment of a special National Fiscal Administration Agency (ANAF) department that will investigate any person “with a standard of living way above their declared income”, the finance minister, George Ialomitianu, has announced. ANAF will check every expense and acquisition and will have access to all payments from the person’s bank account. Any income that cannot be justified will be taxed by the state at 16 percent. To begin with, the ‘black list’ will be put together by checking the databases of the agency and of other state institutions, such as territorial tax agencies or mayor’s offices, and also “internal and external sources,” said
ANAF chief Sorin Blejnar (photo), quoted in media reports. In the first stage, the tax authorities will check people without notifying them, and during the inspection it may ask third parties – including income payers or any public authority or institution – for information or documents, in order to determine their actual fiscal position. The investigation will be conducted in several stages, which will ultimately determine the person’s tax situation, based on which the state will decide whether to charge income tax or not. However, tax advisers say that this form of inspection has a very small chance of success and will become just an instrument of pressure and abuse against taxpayers who are not “ANAF’s friends”. ■
President Basescu dismisses ex-king as ‘Russian lackey’ Romania’s president has launched a stinging attack on the country’s former ruler, King Mihai of Romania, whom he described as a “Russian lackey.” Traian Basescu called the King’s abdication an “act of betrayal of national interest”. He added that Marshal Antonescu – who was the PM at that time – was
to blame for anti-Semitic measures such as the deportation of Jews to Transnistria, but that people must not forget that Romania had a head of state. “To one we gave fortunes; the other we call a war criminal. Why? Just because King Mihai of Romania was a Russian lackey?” Basescu said on a TV show. ■
energy EBRD and IFC approve EUR 115 mln loan for Cernavoda wind farms
The European Bank for Reconstruction and Development (EBRD) and the International Finance Corporation (IFC), a World Bank member, have approved a EUR 114.8 million loan to co-finance the construction and operation of Cernavoda I & II wind farms, which total 138 MW of power. The international financial institutions – which are funding a renewable energy project in Romania for the first time – are both lending EUR 57.4 million to Cernavoda Power, majority owned by EDP
Renovaveis, the world’s third largest wind energy company. Both will retain EUR 42.2 million for their own accounts, syndicating EUR 15.2 million each to a group of commercial banks. The Cernavoda wind farms are located in the Dobrogea region. Cernavoda I (69 MW) is already in operation, while Cernavoda II (69 MW) is currently being commissioned. The total capacity will represent a quarter of the total wind generation capacity in Romania.■
Inversolar to bring photovoltaic technologies onto local market Spanish companies Solaria Energia y Medio Ambiente and Promocions Inversolar 65 have inked an international distribution agreement to sell products on the Romanian market. The deal involves the construction of several solar parks, connected to the grid, designed to cover most of the Romanian
market demand. Inversolar, which will be responsible for promoting the schemes on the local market, will handle the design, delivery and implementation of various projects. The two Spanish companies have the support of the Romanian government to promote this type of energy through green certificates.■
Sterling Resources seeks international arbitration over local investments The Canadian-listed international oil and gas company Sterling Resources has filed a notice of dispute with Romania under the treaty for the promotion and reciprocal protection of investments between Romania and Canada. The company attributed the move to what it described as deliberate and discriminatory actions – such as media attacks – against the company’s investments at its Midia and Pelican blocks in the Black Sea. The notice of
dispute allows for a six-month period of negotiations in which to resolve the issues amicably. If this does not happen, the company can then refer the matter for arbitration. Under the arbitration process, Sterling would claim monetary damages that reflect the ultimate value of its offshore assets. According to company information, the necessary investments in the two Sterling perimeters in the Black Sea reach USD 500 million. ■
Petrom makes first power deliveries to grid from Brazi plant
Petrom has made the first power deliveries to the grid as part of tests run at the Brazi combined cycle gas fired power plant (CCPP). The 860 MW power plant – which will be commissioned during the second half of the year – is the largest private greenfield power generation project in Romania. Petrom began construction works at the EUR 500 million Brazi CCPP plant in 2008. The plant’s flexibility allows the installation of additional wind production capacities in the Romanian system and Petrom is having a 45 MW wind park built. Austrian oil company OMV controls a 51.01 percent stake in Petrom.
CEZ starts revamping TMK Hydroenergy Power operations
The CEZ Group in Romania has completed the necessary steps to take over the operations of TMK Hydroenergy Power, which it acquired in December 2010 and which owns a hydroelectric system near Resita, Caras Severin County. The value of the transaction was EUR 19.8 mln. The total installed capacity of the Caras Severin hydropower system is about 18 MW. The company has four lakes with dams (Trei Ape, Gozna, Valiug and Secu) and four 10 MW micro hydro power plants (Grebla, Crainicel I, Crainicel II and Breazova). Its short-term plans are to identify measures to optimize production while on the medium term CEZ Group plans to upgrade facilities, a process that will continue for about two more years.
SOCAR buys 14 filling stations in Romania
Azerbaijani state oil company SOCAR has acquired 14 gas stations in Romania and intends to expand the network, Rovnag Abdullayev, SOCAR GM has announced. In the next two months, the firm plans to make operational the first seven stations under its own brand in Romania. In addition, it has begun to rebrand another seven. The filling stations are located in North-Eastern Romania. SOCAR has previously announced plans to open 300 gas stations under its own brand in Romania. The company owns filling stations in Azerbaijan, Georgia and Ukraine. ■
economics RCS&RDS announces losses
Telecom operator RCS&RDS has an‑ nounced undisclosed losses for 2010, after posting a net profit of nearly RON 212 million in 2009, according to the company’s financial reports ap‑ proved by shareholders in May. The operator’s business rose 16.4 percent to RON 1.65 billion in 2009, while it ended the previous year with RON 84 million of losses. RCS&RDS has a network which covers over 200 lo‑ cal cities. The company is also pres‑ ent on markets such as Hungary, the Czech Republic, Slovakia, Croatia and Serbia. It is indirectly controlled by businessman Zoltan Teszari.
Court suspends Orange and Vodafone fines
The Bucharest Appeals Court has suspended the implementation of a Competition Council (CC) decision under which mobile operators Orange Romania and Vodafone Romania were fined a total of EUR 63 million for abuse of their dominant position. Bogdan Chiritoiu, CC president, said that the two operators had submitted a guarantee of 30 percent of the fine, in order to be allowed to request the suspension of the decision. He add‑ ed that the CC was waiting for the court’s explanation and would then decide whether to challenge the rul‑ ing.
Eurostat: Romania, third in EU for labor cost rises
Romania is third in the EU in terms of increases in labor costs in the first quarter of the year with 4.5 percent, after Bulgaria on 7.8 percent and Hungary on 5.6 percent, according to data released by Eurostat, the statisti‑ cal office of the European Commu‑ nities. The 4.5 percent increase was compared to the same period of last year, against an EU average expan‑ sion of 2.7 percent. The biggest wage hikes in Romania were registered in the service sector, while the smallest came in construction. Services re‑ corded a 5.3 percent increase in total costs and the wage bill while other costs climbed by 5.2 percent.
10 The Diplomat July 2011
Tarom’s 2010 losses hike 42 percent to EUR 80 million
National airline Tarom posted losses of just under EUR 80 million in 2010, 41.6 percent more than in 2009, according to official company data. The firm had revenues of nearly EUR 306 million in 2010 while its turnover rose to EUR 218.21 million. According to Gabri‑ ela Bordea, general manager of Tarom, the airline did not meet its forecast revenues be‑ cause it was forced to slash fares to adapt to passengers’ lower purchasing power. Despite the poor figures, the airline saw a rise in passenger numbers, trans‑ porting 23.6 percent more customers in 2010 than the previous year, at nearly 2.2 million. The aviation industry posted an
increase of only 9.45 percent, according to Tarom’s statement. The company had a total of 2,368 employees last year, 118 fewer than in 2009. This year, Taram’s headcount is 2,307. The airline was a subject of the la‑ test letter of intent between the Roma‑ nian Government and the International Monetary Fund (IMF) which called for the privatization of the company. So far, the Romanian authorities have decided to sell 20 percent of the national carrier on the stock exchange or to a strategic investor. By the end of the year, the au‑ thorities must assign private management to Tarom. ■
ANAF to lay off 2,000 employees The Romanian National Agency for Fiscal Administration (ANAF) will fire 2,000 employees as part of its restruc‑ turing process, of whom 1,200 will be dismissed in the next two months, said ANAF president Sorin Blejnar, accord‑ ing to media reports. “We will carry out an evaluation to determine who will lose their jobs. Some 1,200 people will be laid off from the National Customs Authority and Financial Guard in the
next 60 days,” said Blejnar in a press conference. ANAF will also cut more than 550 executive positions, to meet a ratio of 12 managers to 100 employees. The measure comes after, in early June, the Government decided to axe 4,927 jobs at ANAF, including 1,200 filled positions. Other positions will be cut in the National Customs Authority (1,427, including 600 filled) and the Financial Guard (713, including 300 filled).■
High taxes on multiple house and car ownership to stay in 2012 The Romanian Government has de‑ cided to keep the additional taxation on ownership of multiple properties and cars in 2012. Parliament had previ‑ ously decided that the tax would apply only this year. In 2010, the Government decided to double the tax on cars with a cylinder capacity exceeding 2,000 cubic centimeters. The same year, the
owners of multiple residential proper‑ ties saw tax rise by 65 percent on sec‑ ond building ownership, 150 percent for the third and 300 percent for the fourth owned building. The regulations were brought in through an Emergency Or‑ dinance which, however, stipulated that the taxation would be applicable until the end of this year.■
economics Private Delta Hospital to open after EUR 13 mln investment A group of Romanian doctors have re‑ cently opened a private medical facility in Bucharest, Delta Hospital, following investments of around EUR 13 million. The facility is located in a 10,000-sqm rented building with a capacity of 55 beds and a surgery department with four rooms, intensive care ward, a diagnostic center and 24 medical rooms. “There is no target for the number of treated pa‑ tients, but the hospital capacity is 200300 patients per month,” said Catalin Copaescu, the hospital manager. “Hope‑ fully, by the end of the year, revenues
generated by medical services will cover the running costs of the hospital.” The main shareholder in the project is Cata‑ lin Andu Copaescu, with the other share‑ holders being Dana Jianu, Stefan Jianu, Alina Ambrozie, Daniela Diaconu, Dan‑ iela Godoroja, Mihai Godoroja and Anca Copaescu. The first 100 operations have already been performed. The hospital is specialized in minimally invasive sur‑ gery, interventional cardiology, oncol‑ ogy and vascular surgery. Copaescu said the prices were half the rates charged in Western Europe. ■
Luxury furniture producer puts EUR 300,000 into Bucharest showroom Italian manufacturer of luxury furniture Minuzzo, controlled by a group of Italian investors, has secured EUR 300,000 to open a 300-sqm showroom in Bucharest’s old center. The firm expects a 20 percent boost in sales this year, especially since, last year was the worst for sales, with a slight recovery observed this year. The manufacturer came to Romania in 1991 and one year later established a production facility in Selimbar, near Sibiu, where it hired 50 local workers. The faci‑ lity covers 13,000 sqm and produces furni‑ ture, parquet and other interior design fea‑ tures. The accessories are imported from different Italian stores, according to the company’s representative. Minuzzo’s main distribution markets are Romania and Italy but it also exports to Great Britain. ■
What are Medlife’s investment plans?
We have a planned budget of EUR 25 mln this year. In H1 we opened the pe‑ diatrics hospital and the Titan Medlife Hyperclinic, both in Bucharest. We also bought the majority stake in a major operator in Arad, Genesys Clinic. Our next projects will be to open another two hospitals, a general one in Brasov and a specialized one in Bucharest. Also, we want to expand operations in Arad and Bucharest and our hyperclinics in Ba‑ neasa, Titan and Grivita.
What does the hospital investment involved?
The MedLife Pediatrics Hospital re‑ quired a EUR 13.5 mln investment. The hospital is six stories tall and has over 15 medical specialties, a medical imaging department, two operation rooms, an intensive care area, a patient evaluation area. The hospital has a total capacity of 132 beds. The total investment in equip‑ ment and facilities was EUR 6 mln.
How will the Romanian private medical sector?
Fast food chain Subway opens first franchise in Romania The American fast food franchise chain Subway is expanding on the CEE market and has assigned two franchises in Roma‑ nia, with the first fast food sandwich unit to open locally by the end of this year. Ac‑ cording to the company, Subway plans to establish 60 franchise units in Romania by 2015, with a focus on the Bucharest market. “Romania is a very interesting market for the franchise system. We think the great‑ est development of our franchises will be in Bucharest, as it is the sixth largest city
Mihail Marcu, MedLife GM
in the EU,” said Martin Princ, regional development manager of Subway in CEE. The company’s strategy in Romania is not to assign a master franchiser but individual franchises. Subway has 270 fast food res‑ taurants in the CEE region, with the most recent opening in Slovakia. The company plans to enter the Slovenian market in 2011. Subway has 35,000 restaurant units operating through the franchise system in 98 countries worldwide and specializes in sandwich making. ■
The medical services market is very dynamic, and the main companies in the field are already at the same levels as those abroad. On the other hand, the market is still very fragmented, because of the large number of small proximity medical practices. This sector is lucra‑ tive and kept growing even when other economic sectors were badly damaged by the crisis. But big players have an ag‑ gressive expansion strategy, which also involves taking over smaller medical groups. We’ll see investments in hospi‑ tals skyrocket, mainly due to the deterio‑ ration of the state health system, which can no longer satisfy patients’ needs.
11
appointments J ean -Francois Fal-
has been appoi nted ch ief executive officer of Orange Romania starting July this year. Thierry Mil‑ let, the former CEO of Orange Romania since 2009, will con‑ tinue to coordinate the contactless payments services across Orange’s subsidiaries from France. Fal‑ lacher has a background in different markets, both business and mass market. Previously, he was CEO of Sofrecom, the international consultancy company for France Telecom-Orange, for six years. lacher
Ionut Lupsa has been
appointed partner in the disputes and arbitration depart‑ ment of law office Vilau & Mitel. He joined the team as a senior in 2004 and holds a bachelor’s degree in law which he obtained in 1997. Lupsa was admitted to the Bucharest Bar Association in 1998. Since 2006, he has been acting as an intellectual property agent. Over 13 years of continuous ex‑ perience as a barrister, he has built up expertise in the fields of commercial law, intellectual property and unfair competi‑ tion, as well as administrative litigation. He is an active member of the Interna‑ tional Trademark Association (INTA).
B ogdan I on has
been appoi nted c ou nt r y le a d e r of E&Y’s prac‑ tices in Romania and the Republic of Moldova starting July 1, taking over from Camelia Hor‑ laci who has held the position since 2005. Horlaci will continue with Ernst & Young Romania as a senior partner, leading the team dealing with the pub‑ lic sector, focusing on European Union - funded projects. Ion has 15 years of professional experience in audit, trans‑ action services and financial consulting and has coordinated large projects in sectors such as power & utilities, oil & gas, pharmaceutical and retail, for mul‑ tinational companies as well as for local entrepreneurial businesses. 12 The Diplomat July 2011
A lexandru Victor Savi -N ims has be‑
come managing as‑ sociate (real estate department) within the law office Vilau & Mitel, having joined the company in 2007, as associ‑ ate. He holds a bach‑ elor’s degree in law which he gained in 2000, was admitted to the Bucharest Bar in 2003, and became a qualified lawyer in 2005. Over eight years of activity, Victor has gained vast experience in the field of real estate, spe‑ cializing in due diligence for real estate projects, building permits, drafting and negotiation of FIDIC-type agreements, as well as in relation to the development of real estate projects.
R adu Stoicoviciu ,
partner, becomes the new advisory leader of Pricewa‑ terhouseCoopers Romania, leading a team of more than 100 management consultants spread across Pricewater‑ houseCoopers Ro‑ mania’s five regional offices (Bucharest, Cluj-Napoca, Timisoara, Constanta and Chisinau). He joined PwC Romania in 1992 and became a partner in 2007, lead‑ ing the Romanian deals team and the SEE corporate finance and business recovery department. He is specialized in project finance, privatization, mergers and ac‑ quisitions, and valuations.
Vladimir Kolarevici
has joined Superlit Romania as regional sales manager for the Balkans, taking over responsibilities for planning, orga‑ nizing, g uiding, co-coordinating and supervising all sales activities on the assigned market and new business cross-Balkan area (contractors, project & design companies, consulting companies, HEPP developers, local authorities and infrastructure projects). Kolarevici holds a master’s degree from the Norwegian University of Science and Technology and previously worked as senior advisor at the Serbian Ministry of Mining and Energy.
Bogdan Dobre has
been appoi nted general manager of the Concrete & Ag‑ gregates division of Holcim. He is replacing Anastas Dimovski, who will continue his career with the group. Do‑ bre has been part of the Holcim Romania team since 2000, and was previously the national sales manager for cement operations.
M ircea B ozga be‑
comes a new part‑ ner in the assurance department of PwC Romania. Bogza has been with the firm since 1997 and will now be working as a partner within the industrial products industry group. He is a member of the Romanian Chamber of Financial Auditors (ACCA) and a qualified Romanian statutory auditor. He has held a number of external roles at various ac‑ countancy bodies and is a regular speaker at seminars run by the industry.
Mihai Ghyka is the new chief commer‑
cial officer of the consumer business unit of Vodafone Romania, starting June 20. Previously, he was president and general manager of Bergenbier Romania (former InBev) and worked for more than a decade in finance and marketing roles for the same company, both in Romania and in the Bal‑ kans region. Ghyka was the Eisenhower Fellow Romania 2009 in the USA. At Vodafone, he has replaced Karsten Wild‑ berger, the former chief commercial officer of the consumer business unit.
Cristian Gavrila, 36,
is the new counsel and head of litiga‑ tion and arbitration at the corporate law firm RTPR Allen & Overy. Previously, he was partner at a top ten law office in Romania and he has gained extensive international expertise from involvement in 20 arbitration cases and winning litiga‑ tion related to competition issues, public acquisitions and communications. Gavrila has been a member of the Bucharest Bar since 2000.
investments Germany
USA
Russia
German company Henkel has announced a EUR 10 mln investment in a new adhesives and construction materials plant in Roznov, Neamt County. The investment should be ready in November next year. With EU funding of EUR 2.8 mln, the 36,000-sqm factory will have a production capacity of between 180,000 and 200,000 tons per year. Henkel operates another two factories in Romania, one in Pantelimon near Bucharest and one in Transylvania at Campia Turzii. The new plant will employ over 70 people.
Car components producer Delphi Automotive is opening a new plant in Moldova Noua, in the South-West of Romania. The site will produce wiring harness modules for EU carmakers. Employment at the new plant could potentially reach 1,000 by the end of the year. Some 1,400 sqm of the Moldova Noua facility was opened in April as part of the first phase of development. An additional 2,400 sqm of the site will be opened in September this year. Delphi has been present in Romania since 1997 and operates four factories.
Russian heavy industry holding Mechel has recently inaugurated its new steel mill in Otelul Rosu, Caras-Severin County. The investment reached USD 50 mln and involved a new electric arc furnace equipped with the COSS system. This installation - which has a capacity of 810,000 tons of liquid steel a year - will be the first in Europe and the third in the world. Mechel invested over USD 200 mln between 2002 and 2010 in six local production units which have 7,000 employees.
Kaufland to open EUR 8 mln shopping center in Ploiesti
Portugal
Sonae Sierra to begin work on EUR 111 mln mall in Craiova
ROMANIA
Portuguese company Sonae Sierra has announced that it will start works on a EUR 111 million at Adora commercial center in Craiova this month. Company officials have announced that they have contracts signed for 40 percent of the mall’s surface - of six hectares - with future tenants including Cora, Cinema City, Altex, Orsay and Pure Fitness. Sonae Sierra has a mall in Ramnicu-Valcea, but the Craiova project would be its first greenfield investment on the local market.
Medical services operator Gral Medical, which is controlled by Robert and Georgeta Serban, has announced that it has invested EUR 600,000 to open clinics in Pitesti, Ploiesti and Focsani in June. The investment is part of a EUR 1 mln development budget for this year and will also include openings in Craiova and a fifth center which could be located either in Galati or Brasov. Gral Medical reported a turnover of EUR 3.5 mln for the first three months of the year, 20 percent more than in the same period of 2010.
Henkel invests EUR 10 million in new factory
The German group Kaufland has announced that it is investing EUR 8 mln in a hypermarket and a shopping gallery in Ploiesti. Construction works should be finished in October this year. Kaufland officials said that the complex will cover 30.000 sqm, of which 7.000 sqm only by the Kaufland hypermarket. The new facility will have 100 employees and sell some 16,000 products. Currently, Kaufland manages 63 stores in Romania.
Delphi to hire 1,000 workers at new plant
Mechel pours USD 50 mln into new steel mill
Gral Medical opens three new clinics
13
RoRec Association and local authorities unvail the National Network for WEEE Collection Centers Romanian Association for Recycling RoRec initiated a national project meant to create a coherent WEEE (waste of electric and electronic equipment) collection infrastructure, in partnership with local authorities.
T
he National RoRec Association ter for every 50,000 people, but no July are Tulcea, Valenii de Munte, Network for WEEE Collection less than one in each locality. Our Calarasi, Brad and Hunedoara. Centers, with the support of new project comes to support local “We are honoured to be the first town-halls, is a service designated to authorities, by offering new solutions to inaugurate The National RoRec the community, and it addresses both for WEEE collection according to Association Network for WEEE Colpopulation and state or private com- european standards, taking into con- lection Centers, and one of our main panies. The collection center is one sideration the 4 kg per capita quota of concerns is the environment protecdesignated area set according to EU WEEE collected yearly – imposed by tion. The citizens of Tulcea county standards, so that wastes from elec- the European Union, and last but not now have a handy solution for collecttric and electronic equipments can be least, considering the environment ing WEEE and in the same time comcollected in an organized manner and protection,” declared Liviu Popeneciu, plying with European regulations,” under safe conditions, by complying President of Romanian Association added Constantin Hogea, Mayor of for Recycling RoRec. Tulcea. to environment legislation. “Romanian legislation states there Among the first collection centers’ The WEEE collection center in should be a WEEE collection cen- locations to be inaugurated by mid Tulcea that addresses both the popu-
Advertorial
The advantages offered by the WEEE collection centers ■ A special location designated for the correct disposal of WEEE ■ Collecting WEEE according to legislation. ■ Protecting the environment from pollution with toxic substances from WEEE. ■ Selective collection of WEEE and transport to authorized reciclators.
Liviu Popeneciu - President RoRec Association, Trifon Belacurencu - Romanian Senate and Constantin Hogea - Mayor of Tulcea city (left to right)
office@rorec.ro, www.rorec.ro
lation and private and state companies and institutions has a special “Infoline”callcenter available on weekdays and Saturdays. Discarded electronic equipments can be brought to Atelierelor Street every Saturday from 9 to 13, while heavy appliances can be picked up free of charge from households, following a request by telephone to the Infoline. Romanian Association for Recycling RoRec is a not-for-profit organization, founded by ten of the best known European manufacturers of household appliances, presently acting in Romania: Amica, Arctic, Bosch Siemens Electrocasnice, Candy Hoover, Electrolux, Gorenje, Indesit, Philips, Groupe SEB and Whirlpool.
Rorec Association’s WEEE Collection Center in Tulcea
Its mission is to actively contribute natural resources, and offering comto European objectives for preserv- plete waste management services for ing, protecting and improving the WEEE, which also includes reintroquality of the environment and the duction of raw material into the ecohuman health, by rationally using nomic sector.
Why should we recycle WEEE Because the toxicity of WEEE order to reduce the effects according to environment is ten time higher than of of pollution, but beyond standards, waste becomes usual wastes these obligations, we should secondary raw material. This be aware that nature has means that natural resources Because each of us is limited capacities to process are used efficiently. responsible for the waste our waste. we generate. We cannot Because waste electrical throw away just anything, Because each child has and electronic equipment can contain dangerous anywhere, regardless of what the right to breathe clean substances which, once we leave behind and of the air, to walk in clean parks disastrous effects that waste and forests, to play in safe they reach the water, air or has on the environment places and to grow up in a soil, have long-term harmful where we live. We all wish for healthy environment, and effects on our food, on the better, cleaner roads, streets, we, the grown-ups, have the water we drink or the air that towns. It is time each of us responsibility to make sure we breathe. did something to achieve that we offer them these These are only a few of the that. conditions. reasons why it is compulsory Because recycling means Because waste becomes for recycling to become respect for the law and for valuable when it is correctly a habit, going beyond ourselves. The legislation recycled. When it is the status of a topic for obliges us to recycle in disassembled and treated fashionable conversation.
white goods
White goods pin hopes on premium White goods market insiders at Bosch, Indesit and Whirlpool tell The Diplomat – Bucharest that sales will see 2-3 percent growth this year, but only if the government takes action to revitalize consumption. Meanwhile, companies are relying on discounts and premium products to stabilize their businesses, as these are the only things still tempting buyers during the crisis. By Cerasela Marin
A
fully equipped kitchen, designed to be the center of the home. The class A++ refrigerator keeps the food fresh, at an ideal temperature and it takes only a few minutes for the specially designed cooler to make crushed ice, just right for making lemonade. Close by, the electric oven cooks four courses at the same time without mixing aromas, and the LCDequipped and internet-enabled cooker hood is showing the most exotic recipes. All the components, along with the dishwasher and the microwave, are perfectly embedded in the minimalistic furniture. We are talking, of course, about many Romanians’ dream kitchen, which, due to the effects of the economic crisis, has become almost impossible for most to afford. Players on the home appliance market say that Romania’s middle class has gone, and that the only people buying appliances now are on above-average incomes. “The white goods sector dropped 50 percent in 24 months, falling to 2002 levels,” Giuseppe Parma, country manager
16 The Diplomat July 2011
at Indesit Romania, tells The Diplomat – Bucharest. Nowadays, customers who before 2008 bought washing machines through loans awarded merely after they showed their IDs are moving towards semiautomatic appliances, the type of washing machines sold just after the communist era, which cost EUR 100 or less. In fact, Romania is the cheapest country in Europe when it comes to home appliances. “On average, customers pay EUR 235 for a refrigerator, a washing machine or a gas cooker, unlike other countries, where the prices are almost double,” says Parma. The reason is simple – local consumers don’t have money and producers are adapting to the market. Another factor that has contributed to the market drop was the banks cutting down on consumer loans. “We’re setting up all sorts of offers and promotions each month, so we can revitalize the market,” Parma says.
Discounts help unfreeze white goods sales
To keep afloat, appliance makers have found
themselves forced to turn to offers and promotions. Customers have been getting discounts of as much as 20 percent compared to the pre-incentive period, and this has led many to flock back to white goods stores. “The best thing is to be visible so you catch the consumer’s attention,” says Mioara Bolozan, marketing manager at Whirlpool Romania. “Today, the most relevant moves a company can make for the consumer are offers and promotions. The vast majority of consumers see promotions as the device that rewards them and makes them interact more with that particular brand.” The customer profile has changed in the past few years, and people who can still afford to pay EUR 300 for a washing machine now want to study every detail thoroughly. “In 2007, customers were more relaxed and I think that the purchasing process was based more on sensory perception, but we mustn’t forget that price mattered even back then,” Bolozan says. “In Romania, the price has always been important, but now it’s really important. Nowadays, besides price, the customer also looks at the appliance’s specs.
white goods For example, he or she may prefer a 7 kg washing machine to a 5 kg one, or a class A+ refrigerator, which is more energy efficient than a class A appliance.” Last year, the prices of home appliances remained the same, despite the government’s VAT hike and a rise in the prices of raw materials. “The average price grew slightly, but the industry support left its mark, so we didn’t have a huge increase,” says the Whirlpool manager. Meanwhile, Indesit thinks that this year people will go back to quality products, but that the market won’t see a price increase of more than 2 or 3 percent.
Embedded systems get embedded in public preferences
While in the past few years premium home appliances were a less developed segment, the high-end market is currently the only sector not to have seen a dramatic decline. Buyers, usually people with above-average incomes, now tend to fit their homes with built-in appliances, embeddable products. “While in 1998 the built-in appliance market was almost nonexistent, in 2010 it’s somewhere around 12-15 percent of the total cooking solution market, and in the West it’s about 50 percent,” said
235
euros is the sum Romanians are willing to pay for one appliance, comparing to other countries, where the figure is almost double Florin Porojan, manager of the Romanian branch of appliance maker Franke. And appliance makers have recently been trying to meet customer demand by promoting the idea of the “complete line,” which offers all the equipment needed in a kitchen, from sinks, stoves and cooker hoods to dishwashers and refrigerators. “A complete kitchen consisting of about five products costs on average about EUR 2,000, but it depends a lot on what products and what technology it holds,” Porojan says. The largest total bill at Franke in 2010 was EUR 11,500 for a complete kitchen, the manager adds.
“Customers usually prefer classic kitchens and this trend will surely continue.” Franke Romania had a smaller turnover in 2010 that in 2009, because of a drop in consumption due to the VAT increase. “Franke’s business is down 37 percent from 2008, but for this year we’re estimating a bigger turnover than in 2010.” Although the built-in appliance segment is aimed at premium customers, there is still a long road ahead until kitchens have the same status as they do in Western countries, where the room is a social place, believes Mihai Voicila, GM at BSH Electrocasnice, the Romanian subsidiary of BSH Bosch und Siemens Hausgerate. “There is still room for the Romanian market to mature, and Romanian customers only now understand the advantages of a dishwasher, for example, a product that makes up only 3 percent of the local appliance market.” Voicila says that local consumers currently buy only four kitchen elements and they are willing to spend a few thousand euro on an integrated kitchen. “Prices for a fully equipped kitchen with built in appliances start at EUR 1,500 and can go up to EUR 10,000,” he says. What is certain is that most companies
17
white goods Sales cool until next year
who sell premium products say that well-todo Romanians are the only ones who still have purchasing power and who, in times of crisis, have tried to invest in technology.
which accelerates the drying process while saving energy. But what scare consumers most are the product prices, which are higher than for class A appliances. “This is where the state should intervene,” says Bolozan. “The penetration of A++ green products grew abruptly in many countries when they started being subsidized, because the production costs alone are high for an A++ product, compared to a class A or A+ appliance. And it’s clear that for a country such as Romania, which ranks below the Czech Republic and Poland in purchasing power, such a measure would make customers more aware and more willing to buy.” Another measure that the players in the market are proposing is buyback. “However, this method is only in its infancy, and Romanian customers are reluctant to give up their appliances, even if they’re old,” says Bolozan.
While the first few months of this year saw growth for home appliances, market players are still being reserved. The sector grew 10.7 percent in the first three months of the year, compared to the same period of last year, to EUR 307 million. According to GFK Temax, this is the first rise in the last two years. Small appliance sales also climbed 6.5 percent between January and March. As for the large appliance market, the first three months brought stability, and sales stayed at the same value as last year, EUR 59 million. However, the Indesit manager believes that the market needs years to rebound. “In the last few months, the Western market has showed a positive trend, which doesn’t tell us that the crisis is over, but that in the next period this positive trend will also move to the Eastern region, including Romania,” says Giuseppe Parma. “I expect a better situation from September of this year, and I hope that by 2012 we’ll be out of the tunnel. We won’t have growth rates of 15-20 percent anymore, but we could have 5-10 percent.” Parma says that only 70 percent of Romanian families have automatic washing machines, which suggests that there is still potential for market growth. The Whirlpool representative is also confident in the market’s potential for growth and has announced that she expects a bigger turnover for this year, but her optimism is muted. “For this year I’m expecting neither good nor bad news. We’re trying to keep sales at a stable level and to finish the year on a slight increase of a few percent,” Bolozan says. ■
wide figures we’ve seen, it has also had no effect on the Miele brand as a whole,” says Leo Popescu, marketing manager at Miele Appliances Romania. “It’s true that the customer profile has changed in some ways. While in 2007 the customers were wealthy individuals who wanted the most expensive products, nowadays they are paying more attention to detail and want a machine more suited to their needs.” The average price of a completely furnished and equipped five-piece kitchen can reach about EUR 15,000, but the largest tab the company has had this year was more than EUR 150,000. “For the higher category of consumer, usually active people, the kitchen becomes the center of their home, and the
technology is there to make their lives easier,” says the Miele manager. He predicts constant sales growth for the next few years and hopes that 2011 will bring his company a EUR 3 million turnover. “If the upward trend keeps up, in 2012 we’ll reach EUR 5 million in turnover.” But to achieve this target the company needs to expand to a national level. Besides Bucharest, Miele also has showrooms in Arad and Brasov, and will set up shops in Cluj and Constanta. The showroom in Brasov was opened at the beginning of this year, with an investment of about EUR 70,000, of which Miele paid about 40 percent. “We’re also talking about opening a shop in Iasi,” adds Popescu.
The A+++ to Zeolith of new customer trends
Another customer trend in 2010 was energy efficient products. A-class white goods could save as much as 90 percent on energy compared to ordinary appliances. Considering the recent repeated price increases in electricity and water usage, customers have begun to pay attention to whether the goods they are purchasing save more water or energy than before. “White goods from class A+++, which has recently been introduced to the Romanian market, are designed to save 60 percent of used energy, compared to A class appliances,” says Voicila. “The good part is that more and more customers are beginning to see the advantages of such efficient products.” But it’s not only customers’ needs that make energy efficient products popular on the market – demand is also being boosted by new EU energy norms for refrigerators, washing machines and dishwashers. “Since as far back as December 2010, BSH has adapted of its own accord to the new energy labeling for its home appliances. Starting with December 2011 this new labeling is compulsory for all home appliances producers that sell their products in the EU,” says Voicila. At a global level, 45 percent of Bosch’s research and development budget goes towards finding environmentally-friendly technological solutions. “Innovative solutions are designed to lower electricity and water consumption, and water, as a resource, will become more and more important.” An example of this technology is dishwashers that use the natural mineral Zeolith,
Mioara Bolozan, marketing manager at Whirlpool Romania
Miele, as good as it gets About EUR 2 mln – this is how much German brand Miele has reported as turnover for last year. The biggest luxury home appliance maker worldwide entered the local market in 2007, when the company opened an electronic component plant in Brasov and a showroom and service point in Otopeni, Ilfov County. The appliance maker’s main line of business is quality products that have a long shelf life, of about 20 years. The prices are intended to reflect the quality of the products. A washing machine starts at EUR 1,000 and can reach tens of thousands of euro, and the Romanian branch sells about 300 of them a year. “The crisis has had absolutely no effect on the Romanian business, and from the world-
18 The Diplomat July 2011
infrastructure
Romanian infrastructure tries to avoid becoming road to nowhere Things have started moving in Romanian infrastructure. At least that is the official line from the authorities, who are talking up EUR 3 bln worth of motorway projects currently under way, due by 2012. But this is not the first time the authorities have announced big projects which, for legal or financial reasons, have ended up stalling and becoming three times as expensive as in the beginning. One thing is certain: Romania has to access over EUR 5 bln infrastructure EU funds, as the lack of modern road infrastructure is a major handicap for economic development. By Cerasela Marin
S
ix paired tunnels, together 30 km long, and double bridges four km long traversing the Carpathians, making their hard way through the mountains. The motorway begins with a road junction at Comarnic, after which it goes underground through three double tunnels, to pass around the town. It’s the same in Sinaia and Busteni, cities that will have underground tunnels built in hard rock go around them, and suspended roads and bridges on the surface. The longest tunnel will be the one in Predeal, which will measure almost 3.8 km. Basically, Prahova Valley could be traversed, either on the surface or underground, by one of the most ambitious infrastructure projects in Romania – the Comarnic-Brasov motorway, a spectacu-
lar project that was to have been realized through a public-private partnership. Work on the 55 km of motorway, costing about EUR 1.2 billion, should have started this year and ended four years from now. After that, the plan was for the State to lease the project for 26 years to contractors Vinci and Aktor, two companies with vast experience in infrastructure. But the dream was shattered in less than six months, when the government decided to cancel the contract. The reason? “The two companies did not manage to do what is supposed to be done in this kind of public-private contract: they weren’t able to close the contract financially,” Chris Germanacos, director for CEE and senior VP for Louis Berger,
which was the consultant on the project, told The Diplomat – Bucharest. “The contract stipulates a certain duration – here it was four months – during which time you have to bring the financial resources and commit them. The Comarnic-Brasov motorway is an expensive project, and they did not manage to raise the money.” It seems that it was the financial crisis that buried the project. The banks got scared and refused to finance schemes this big. “The concessioners know where to get the money, but that money is not secured until the banks know that the contract has been awarded to that concessioner,” said Germanacos. “What may have happened is that the banks felt that the project was too 19
infrastructure risky in these troubled times. Maybe ten years ago it would have moved forward.”
Communist inroads
But ten years ago nobody was thinking of building such a highway. Or even if they were, they could not turn it into a viable project. That is why Romania has only 313.5 km of motorways built, while Germany has almost 9,000 km, France 8,000 km, and Great Britain around 3,000 km. In their 45 years in charge of the country, the communist regime built 130 km of motorways, with the remaining 183.5 being done after 1989. In the 1970s, the 110 km long Bucu‑ resti-Pitesti A1 motorway was the first to open. Then, in 1987, the dictatorial Ceau‑ sescu regime opened 18 km of motorway between Fetesti and Cernavoda, on the road to the seaside. In the first 15 years of post-revolutionary democracy, the government did nothing to expand the country’s motorway network. A 100 km portion of the first Romanian highway, the A2 ‘Sun’ motorway, was opened in 2004. By 2007, another 50 km of this motorway had been completed. The remainder will be finished “this year,” the authorities claim. And this year the Timisoara-Arad motorway, 32.2 km long and worth EUR 192 million, was also scheduled to be finished. This project includes the Arad road belt, 12.3 km long and with an estimated cost of EUR 173 million. “Work will be finished at the end of this year, and in the first trimester of 2012 the road will be delivered and made available for use,” said an optimistic Anca Boagiu, the minister of transport, after a visit to the motorway’s construction site. According to a ministry document, some 276 km of motorway should be available by the end of next year, through projects worth EUR 3 billion.
European funds prove problematic
Most projects to build motorways are designed to be financed either with nonrefundable EU funds, through the Cohesion Fund, or with loans from international financial institutions such as the European Investment Bank (EIB), the World Bank (WB) or the European Bank for Reconstruction and Development (EBRD). According to the Daniela Draghia, general manager of the National Company for Motorways and National Roads
Romania has only 313.5 km of motorway built, while France has 8,000 km and Great Britain around 3,000 km (CNADNR), the absorption of European funds is going well. “The CNADNR has submitted 23 projects to be financed with European money, worth over EUR 2.5 billion, while the total sum allocated through the Operational Program for Transport is EUR 2.1 billion,” Draghia told The Diplomat – Bucharest. “There are no problems here, seeing as the company has submitted projects that cover the entire sum made available through European funds.” A statistic that looks good on paper, but the reality is alarming. According to the Ministry of Transport, the absorption rate of European funds in early June was 4.2 percent of the EUR 5.7 billion of EU funds available for transport infrastructure between 2007 and 2013. The situation has improved considerably in recent
months, given that in September 2010 the absorption rate was only 1.8 percent. “I believe that by the end of 2011 we will have signed contracts for all EU funds allocated to transport and the absorption rate will reach 20 percent,” Boagiu told The Diplomat – Bucharest. Five segments of motorway, together 98 km long, have been awarded through public auctions and are to be financed by European funds. Their total value is almost EUR 700 million. One of the companies that won the contract for one of these segments is Alpine Bau GmbH, which will build 17 km of highway. The project is worth over EUR 124 million and is to be finished by 2013. “The extremely short time frame in which the project needs to be executed is by far the biggest challenge,” said Ionel Giuglea, the company’s manager.”Collaboration with the beneficiary and with the consultant will have to be flawless, teamwork is a must, and every member of this extended team has to act fairly and in the interests of the project, which is to say they have to make sure it’s ready at the agreed time and under the agreed conditions.” Another project financed with European money is the Dumbrava-Deva segment of the Lugoj-Deva motorway, 72 km long and worth EUR 945 million. According to CNADNR officials, the auction for the design and construction of the motorway will be held during this summer, and the project will take four years to be completed. ”To this we can add the auctions for the road belts for the cities of Targu-Mures, Bacau and Tecuci, which are to be done with the savings made on projects financed by the European Agricultural Fund for Rural Development (EAFRD). These savings allowed us to go ahead with public acquisition procedures for the Craiova South-East, Mihailesti and Brasov road belts,” added Draghia.
Corruption jeopardizes Romania’s European financing The European Commission has halted payments under Axis 2 of its Regional Operational Program, money intended for the improvement of regional and local transport infrastructure, because of wrongdoings found on four projects. The European institution has asked the Romanian authorities to check all contracts that the beneficiaries of these four projects have signed. “We are talking about deficiencies in the public acquisition system for Axis 2 contracts: the use of discriminatory selection criteria by the authorities when choosing road construc-
20 The Diplomat July 2011
tors, the unjustified use of accelerated procedures, and extra work contracted as similar work,” announced Ministry of Regional Development and Tourism officials. Two of the projects – the repair of county roads – were submitted by Teleorman County Council, another – the improvement of National Road 1 – was submitted by Ilfov County Council, and the last – the modernization of Buzau County areas with proven tourist potential – was submitted by Buzau County Council’s Territorial Administrative Authority, in partnership with the
Mereni Commune Territorial Administrative Authority. The money is not lost yet, according to Brussels officials. The EC has asked the Romanian authorities to check all 124 Axis 2 contracts within the next two months and to send their conclusions, along with proposed courses of action, to the EC. “Based on the conclusions we draw from the Romanian authorities’ answers, the EC will decide what happens to the money,” says Ton Van Lierop, spokesman for the EC, quoted in media reports.
infrastructure International financial institutions remain skeptical
European money alone is not enough to build decent infrastructure in Romania. The Romanian Government can however get loans from international banks, which offer attractive interest rates and incentives. “Our loans are provided at the most favorable conditions on a similar basis to other EU member states,” said Milena Messori, director for Romania with the EIB.
But the latest deal inked in 2006 was road repair VI (a loan for EUR 0.5 billion). “This year, the EIB focus remains on projects already under implementation and on EU priority projects, which need to be backed by adequate budgetary resources,” added Messori. “Projects need to be well prepared and a key focus in the coming period will be the absorption of European funds.” However, it is not only the EIB that has showed interest in financing Romanian
Only 45 of the 400 km stipulated in the Transylvania motorway contract have been built to date and total cost exceeded EUR 1 billion Since 1993, the Romanian Government has borrowed over EUR 3.5 billion for transport infrastructure projects worth EUR 8 billion from the EIB. The majority consist of loans for road repairs (six projects, loans of EUR 1.3 billion), motorways (three projects, loans of EUR 0.7 billion) and railways (three projects, loans for EUR 0.5 billion).
projects, but also the EBRD. Although it has focused more on financing railway and water projects, the EBRD also pondered involvement in the Comarnic-Brasov project and was disappointed by its cancellation. ”In 2009 and 2010, the EBRD worked closely with potential investors and with
Romanian authorities in the environment, social sector and in public acquisitions, in order to become involved in this project. The cancellation of the Comarnic-Brasov project was a great disappointment for the bank,” stated officials in a press release at the time. The lender had also expressed its willingness to finance this project, but no steps were taken in this direction.
Transylvania motorway, a Pandora’s box
To date, the Government has paid billions of euro out of its own pocket for the 300 km of motorway currently in use, according to a document from the Ministry of Transport. Flawed projects were financed, and delayed for many years. One such example is the Transylvania motorway, awarded eight years ago to the American company Bechtel. The contract to build the BrasovCluj-Bors motorway was signed in 2003 by then minister of transport, Miron Mitrea, and PM Adrian Nastase, with a value of EUR 2.2 billion. Work began in June 2004 on the 2B and 3C sections of the motorway: Campia Turzii-Gilau and Suplacu de Barcau-Bors. The project’s deadline was initially set for December 2013.
21
infrastructure
Highway saga
Location
Length Costs Funding (Km) (mln Euro)
Bucharest – Pitesti Bucharest – Cernavoda Campia Turzii – Gilau
111 151 51.5
- - 236
Status
state budget functional state budget, EIB, ISPA functional state budget functional
Location
Length Costs Execution Constructor (Km) (mln Euro) status
Nadlac – Arad Nadlac – Arad Timisoara – Lugoj Lugoj – Deva Orastie – Sibiu and Sebes bypass Timisoara Lugoj Orastie – Sibiu and Sebes bypass Orastie – Sibiu and Sebes bypass Orastie – Sibiu and Sebes bypass Lugoj – Deva Lugoj – Deva
22.18 16.98 9.5 27.4 22.11 25.62 24.1 19.74 16.1 38.1 34
22 The Diplomat July 2011
115.8 124.45 63.62 205.9 182.91 134.78 166.65 114.26 146.63 428.37 517.2
2011-2013 2011-2013 2011-2013 2011-2013 2011-2013 2011-2013 2011-2013 2011-2013 2011-2013 2011-2015 2011-2015
Romstrade – Monteadriano Engenharia e Construcao – Donep Construct Alpine Bau Spedition UMB SRL – Technostrade SRL – Carena SpA Impresa de Construzioni Tirena Scavi SpA – Societa Italiana per Condotte d’Acqua SpA – Cossi Constructioni SpA Impregilo Tirena Scavi SpA – Societa Italiana per Condotte d’Acqua SpA – Cossi Constructioni SpA Strabag Straco Grup SRL – Studio Corona Civil Engineering Astaldi SpA – Euroconstruct ‘98 – Astalrom auction launch: June 2011 auction launch: June 2011
infrastructure Legend Executed motorways Motorways in execution Motorways to be launched in 2010 - 2011 Motorways to be launched Source: Ministry of Transport. Last update on May 20
Location
Length Costs Funding costs (Km) (mln Euro) (mln Euro)
Status
Bucharest – Moara Vlasiei Moara Vlasiei-Ploiesti Cernavoda-Medgidia Medgidia-Constanta Constanta road bypass Suplacul de Barcau-Bors Deva-Orastie Arad-Timisoara Arad road bypass
19.5 42.5 19.3 31.5 22.1 64 32.8 32.2 12.3
ongoing works ongoing works ongoing works ongoing works ongoing works ongoing works ongoing works ongoing works ongoing works
492 318.6 211 203 192 963 228.65 194 173
state budget: VAT (45), lands (50) C+M (251), lands (17), consultancy (2.2), VAT (48.4) CF* (36), EIB (115), state budget (60) CF (35), EIB (111), state budget (58) CF (53), EBRD (75), state budget (64) state budget: VAT (153), lands (55) - CF (44), EIB (85), state budget (65) CF (40), EIB (76), state budget (57)
* Cohesion Fund
23
infrastructure
Politics talks infrastructure Miron Mitrea 2003
Gheorghe Dobre 2005
Ludovic Orban 2007
Many of our dreams have become reality this year. One of these dreams is for Romania to end 2003 with an infrastructure program of European importance. The Brasov-Bors motorway – part of this major program – seems to be the largest-scale project that will connect Romania to the European Union and Western Europe.
Over the next six years, Romania will be a huge construction site. The country will have approximately 1,200 km of highway completed or in various stages of development by 2012, about 380 km in 2006, 540 km in 2007 and over 800 km in 2008. We are able to allocate another EUR 100 million to highway works this year, but it depends on the constructor’s capacity to spend the funds already allocated.
Everything that was built on the Transylvania motorway was executed during my mandate as minister of one year and seven months. It is vital to develop this motorway, but the contract will be reviewed to ensure it is implemented faster than previously estimated. Also, we will keep close control over expenses so they don’t spiral more than planned.
“The body of the contract, crammed into about three pages, was written in three days and signed within a week, without any feasibility study, without properly identifying financing sources, and without having a per-kilometer price properly evaluated by experts,” Radu Berceanu, then minister of transport, said in 2009. In 2003, the price per kilometer of motorway was set at about EUR 5 million, and the route was drawn out without any on-site research, with the result that the motorway passed through Suplacu de Barcau oil well park. The contract was drafted under the “careful supervision” of attorney Simona Neagu, who was paid a fee of EUR 2.2 million for the task. It was denounced both by the EBRD and the International Monetary Fund, as well as by civil society groups, which led to it being halted and brought back to the negotiation table by Mitrea’s successor, Liberal Democrat Gheorghe Dobre. The contract’s dubious content brought Mitrea to prosecutors’ attention, and he was investigated for not respecting his duty to present to the government the financial appendixes to the contract, for them to be decided upon and approved. The court decided however that the evidence against Mitrea was not strong enough for him to be charged and for a full penal investigation to begin. That is why work on the motorway only started in 2007. Until now, only 45 of the 400 plus km stipulated in the contract have been built, and the total cost of the scheme has exceeded EUR 1 billion. The State’s debt to Bechtel now stands at EUR 170 million, causing the American contractor to halt work yet again. Moreover, the company has announced that it will be
moving its equipment from Romania and sending it to Kosovo and Oman, where it has won some other contracts. ”We are currently negotiating with Bechtel to reach agreement on reasonable costs and to decide what the construction calendar will be for the next period,” said the director of CNADNR. ”The contract with Bechtel beats all records when it comes to prices. For the segment between Campia Turzii and Gilau, Romania has to pay EUR 16 million for each kilometer that the American company has built.”
Cris, and Baia de Cris-Varfurile. “There were also some issues with a contract we had with Astaldi, but fortunately in that case the contractor reacted well to our observations and acted in the way that the CNADNR asked it to,” added the director. “This is a message we wish all contractors would understand – the Romanian Government is set to defend its best interest and will no longer stand for infrastructure projects stalling without reason, while they get more and more expensive.”
Authorities show their teeth
The increase in prices for infrastructure projects has been the subject of an analysis ordered by the European Commission and the European Investment Bank, called Jasper. According to this document, Romania is the Eastern European price hike champion when it comes to road infrastructure work, with prices growing 3.9 fold in less than 10 years. Specialists gathered from each researched country data on a basket of road infrastructure projects, and analyzed the evolution in prices. While the difference between the Ministry of Transport’s initial estimate and the figure when the contract is signed is usually reasonable, it spirals between the time when the contract is awarded and the moment the project is finished. In other words, contractors usually initially name low prices, the Road Company approves them, and then the contractors gradually up the prices, with the CNADNR’s approval. “Looking at the price rises from the moment the project is awarded until it is completed, in Romania these differences can be major – 63 percent, compared to
24 The Diplomat July 2011
But the State has finally found a solution to make contractors follow project specifications and deadlines – cancellation. “Precisely because some projects were stalling without any reason, and contractors were asking for more money and for extended deadlines that would have delayed these projects more than we first estimated, we decided to cancel contracts,” Draghia told The Diplomat – Bucharest. “Among those notified are the contractors of the Cernavoda-Medgidia motorway segment, and those of the Moara Vlasiei-Ploiesti segment, but the latter have revised their demands and have promised to finish the segment by December 15, 2011. The design and execution contract for the CernavodaMedgidia segment was cancelled, and a new auction is under way, to find a new contractor.” The state-owned company didn’t stop there. Apart from the Cernavoda-Medgidia deal, the CNADNR also ripped up two other contracts, for the renovation of National Road 76 from Soimus-Baia de
Why we’re paying a higher price
infrastructure
Radu Berceanu 2006
The Nadlac-Arad route was designed to be completed by 2012, but I’ll do everything possible for the project to be completed in 2010. The highway is a luxury.
2009
Even though we are in crisis, the target can be achieved - 836 km by 2012.
2011
The Transylvania motorway isn’t a priority; it was and still is a stupid project.
48 percent in other countries,” states the Jasper report. However, the idea is quickly dismissed by Germanacos of Louis Berger, who told The Diplomat – Bucharest that prices are the same for other countries in the region too. “We are working in 14 countries in Europe. We are also working in Kosovo where the big motorway project, connecting Pristina to Tiranna, is being constructed by Bechtel. I’m not sure that if you look at the unit cost in Kosovo you’ll find it cheaper than here in Romania.”
The EU funds absorption rate in June was 4.2 percent of the EUR 5.7 bln available for infrastructure But the Jasper analysis also found that Romania’s political and economic instability, as well as corruption and bureaucracy, are keeping big European contractors at a distance. These companies don’t want to invest in Romania, which leads to a lack of strong competition and so to high prices for road work. “About 14 companies enlist in the majority of infrastructure auctions, mainly Romanian, Greek, Turkish, Italian or German,” the report states. Two more issues, confirmed by the authorities, which lead to prices escalating fourfold are expropriations and archaeological sites that construction teams
Emil Boc 2009
Anca Boagiu 2011
uncover when they work. “We solved the archaeological site problem by establishing a special service within the CNADNR that makes sure construction companies get work fronts in the shortest possible time,” said Draghia. “The expropriation issue was also solved by promoting a new legal framework that eliminates all delays and all the stalling that they cause.”
ferent, but generally things are changing as Romania makes amendments as an EU member state,” Germanacos added. “But there are some ways of operating that are left over from the pre-accession days, and when there are hard decisions to make, in the great majority of cases you need the go-ahead from the Government.” Slight optimism can still be detected from those involved in infrastructure projects. While the transport minister, Anca Boagiu, promises to speed up works and to put into use over 200 km of motorway in the next year, the CNADNR’s Daniela Draghia is joyfully counting the steps Romania has taken to access European funds and to start work on the Pan-European Corridor IV. Chris Germanacos also sees an improvement in Romania’s infrastructure, especially since there are solutions for contracts that don’t go well. “Quality is improving and people in the public sector are starting to know the business and know when a contractor is trying to raise the price. If this happens, the State can impose a penalty on a contractor or can make them redo the contract.” The European Investment Bank representative is also hopeful about the future. “Romania will need support to accelerate the implementation of infrastructure projects and the EIB intends to cooperate with the national authorities and the European Commission to support such efforts,” said Milena Messori. “We will remain a partner for Romania in this development process.” In this case, all Romanians have to do next year is wait – wait and hope for the 270 km of motorway that will link us to Europe. ■
T he Roma n ia n Gover nment has provided the financial resources to complete some 30 kilometers of this highway this year (Bucharest-Ploiesti). Our goal is for the Moara Vlasiei-Ploiesti section of the highway to be completed in July 2010. This is evidence that infrastructure is not only a priority for us on paper, but in reality as well.
Infrastructure maintenance, a hidden extra
But infrastructure problems don’t end when the projects are finished. In many cases, that’s when they actually start. And that is because maintaining the roads is often more expensive than building them in the first place. “Maintenance is the key and that is entirely an issue of state resources, whether financial or physical,” said Germanacos. “Romania has good resources, but you could build a road to the highest standards only to find that in two years time, especially in Romania’s climate, the road decays. You have to do maintenance, yearly or periodically.” However, Germanacos notes that it is possible for road maintenance to be leased. “If there is no budget for the State to do it, you could do like the United States does and outsource the maintenance of assets. The government signs a contract with a company who is responsible for maintaining the quality of the roads.” Germanacos says that the Romanian Government has never asked his company, Louis Berger, which has over 100 consultancy projects in Romania, for advice on infrastructure projects, although the company has been present in Romania for the last 20 years. “Every contract is dif-
We are in discussions with Bechtel. We will not attack any new section of the highway until we settle on the technical and economic details of the contracts. As minister I cannot agree to go forward with a contract which, whenever I go to Brussels, people accuse of being a black hole in the budget. However, I do not contest the need for this highway.
25
infrastructure
Anca Boagiu:
‘We must get Romania back on track’ Eleven years after Anca Boagiu, minister of transport, launched a bold program for national infrastructure development in her first term – out of which only the motorways were not constructed – the plans have been changed. The minister tells The Diplomat – Bucharest that a precarious legal framework and corruption are to blame for the poor results. Now, Boagiu wants to take the absorption level of European funds up 16 percentage to 20 percent by the end of the year. By Cerasela Marin How can infrastructure standstills and terrible pricequality ratios be avoided?
I think we can say that these problems are already something of the past. While, until now, the negotiation and awarding processes for some contracts were deficient, a situation made worse by the lack of a legal framework, now things are moving forward. We have modified all the laws that kept these processes back, including the expropriation law, where we significantly reduced deadlines, and we also made massive savings at state budget level, by taking over the public registrar framework when evaluating land. Also, we modified the law on public auction appeals, where we shortened deadlines for resolution. As for prices, we have introduced cost standards, a move which has had an effect on auctions for contracts financed with European money. This year, for contracts worth an estimated EUR 2 billion, for the Nadlac-Sibiu motorway, we have saved EUR 600 million. We’ve also made sure that prices won’t go up after the contracts are signed. To do that, we introduced tight regulations that don’t allow the value of the contract, brought up to date based on statistics or new laws, to go up more than 10 percent. And if the deadline for the contract is missed, we set a penalty of 0.1 percent of the total value for each day that the contractor is late. 26 The Diplomat July 2011
Is the quality of the infrastructure work satisfactory, from a pricequality point of view?
Quality issues appear when construction companies, in complicity with representatives of the beneficiary, secretly modify the technical solutions for the contract, in order to gain extra money. Consultants also often take part in this “game”, by certifying low quality work. But with the new rules we have established, we are keeping an eye on contractors, monitoring them, and also quickly imposing penalties, if necessary. From September of last year to March 2011 we imposed penalties of over EUR 40 million on construction companies.
What is the absorption rate for European funds and what are the plans for 2011?
For 2011, we decided that the ministry’s financial resources should first go on the attraction of European funds, and the results are already starting to show. By the beginning of June, 82 infrastructure projects had been submitted, worth a total RON 22 billion. Of these, 44 contracts, worth RON 3.6 billion, have already been signed. The absorption rate for European money grew significantly, from 1.8 percent to approximately 4.2 percent, in early June. This is also starting to show in repayments: up to now, we’ve repaid RON 486 million, up over 200 percent compared to what we had repaid by September 2010. To this we can also add advanced payments on motorway contracts, worth another RON 709
million. I believe that by the end of 2011 we will have signed contracts for all EU funds allocated to transport and the absorption rate will have reached 20 percent.
What is the situation with the Bechtel contract?
About the Bechtel contract I can say that we’ve got some difficulties convincing the company to align prices with the standards of cost, and also to set a construction timeline. Until now, although work has begun on only 26 percent of the total construction, and we only have activity on 12.5 percent, expenses are EUR 1.2 billion. From 2004 to 2011, payments for the Bechtel motorway make up 50 percent of the CNADNR’s total investment.
When will we see the next stretch of motorway?
You will see the first stretch this summer. At the end of July, we’ll open traffic, one lane in each direction, between Basarabi and Constanta and on the Constanta-Agigea detour. Completion will only come in 2012. We couldn’t make up for two years of delays in only nine months. Three weeks ago, we put up for auction the CernavodaMedgidia segment, where we cancelled the contract with the French company Colas. We hope to have a signed contract by the end of August – the contractor will have three months for the design and 12 months for the actual construction. We are also working on the Arad-Timisoara motorway, which will be open for traffic by year-end. ■
expat relocation
Operation: expat Emerging markets like Romania have in recent years been a magnet for firms looking to expand their horizons. The know-how transfer initially means the relocation of some of these companies’ top international talent. Expats, real estate agencies and HR specialists told The Diplomat – Bucharest how firms get their best people over here – and what it all costs. By Magda Purice
I
rishman Shane Downing, ALD Automotive Romania GM, moved from France to the capital of Romania in February. It sounds simple enough, but it is an operation that needed time and a lot of money. “Moving to Romania on an expat program is not only exciting but a hugely challenge. It’s not very common for an expat to have more than three dependent children in the family and in my situation the three children I have are all under the age of 14. One usually needs space and comfort while also considering close proximity to schools and amenities. In my particular circumstances I have chosen to forget about the added luxuries and finally decided on a villa in the French quarter,” he said. Downing had specific demands when he came to Romania. “I required a property of 250 sqm-plus, a small garden to host friends for a barbeque, a minimum of five bedrooms which could give the children individual bedrooms and one guestroom for foreign visitors. I chose a villa over an apartment as most apartments I viewed did not have the space, storage and basic requirements mentioned,” added the GM. Jorg Riommi, creative director of Saatchi & Saatchi, moved to Romania four years ago and has changed home four times so far. Above all, Jorg is looking for “firstly comfort and security, green surroundings and a nice area. The apartments I have
lived in were all pretty much at European standards. I have lived in different areas starting with Casa Poporului, then I moved to Piata Rossetti, then Floreasca, and now I have found the place I like the most so far in Herastrau,” he said.
But how much does a company have to stump up to bring in an expatriate? Alina Vuluga, global mobility coordinator at Interdean Bucharest International Relocation, the local branch of the worldwide relocation services provider, says that a
The costs of relocating an expatriate to Romania could include monthly rent of up to EUR 5,000, school fees of about EUR 19,000 per child per year and other costs Regardless of price, expatriates coming to Romania look mostly for safe areas and suitable conditions for their families, since many of them are married with children, and this is how relocating expats has gained terrain in its niche segment.
Relocation, a costly business
Due to the economic conditions of recent years, companies have chosen to relocate managers while avoiding expensive expatriate packages. That is why the number of foreign specialists working in Romania has increased over the years but the number of expatriates has fallen in the last decade.
relocation package involves very high costs for accommodation and other aspects of life. For instance, according to the company’s calculations, the costs borne by a multinational firm relocating an expatriate to Romania could include monthly rent of EUR 4,500-5,000, school fees of EUR 15,000-19,000 per year per child, shipping of the manager’s personal assets and other costs that are the subject of negotiation between the manager and the company. The attitude to this bill has changed in 2010 and 2011 from the previous years on the Romanian market, when multinationals were more relaxed about this kind of cost. 27
An exclusive circle of privileges for those who expect the best Interview with Ms. Daiana Voicu, President Carlyle Properties and Mr. Alexandru Florea, Managing Director Carlyle Properties What was the reason behind the decision of creating Carlyle Properties? Daiana Voicu: The decision of creating Carlyle Properties was taken over five years ago and the firm was established as a project management company with focus on green buildings development. At that moment there were no companies on the market offering such services at a quality level that would match the expectation of our clients. Although we witnessed a real estate boom in 2006 to 2008, the companies offering these types of services were not developed. We decided to establish ourselves a company that would offer property and management facility services at the high standard our clients demand. One of the advantages we had when we established Carlyle Properties was the indepth knowledge of our clients expectations and the ability to deliver a solution to the highest standards. We also had a critical mass of clients that made the decision of establishing such a company economically viable. On the facility management side, we understood that an office building is a living creature that will give great opportunities for the development of additional services, so we took this to a different level. I think it is safe to say that Carlyle exceeded the European standards in the facility management area, offering an additional level of sophistication. To give just an idea of the complexity of the services on offer, there is a whole array of additional benefits that range from dedicated medical services in our own state of the art clinic, to catering services, sport and gym facilities as well as entertainment in the private club located in the Oxford Gardens residential complex. All these facilities can be accessed through a membership card – Willbrook Black Card – that not only offers access to the above mentioned facilities but to numerous discounts in luxury shops or restaurants.
Which are the advantages of working with Carlyle Properties? Alexandru Florea: We proud ourselves with offering one of the most comprehensive package of services in the area of property and facility management. And not only the most comprehensive, but also at the highest level of quality and sophistication. Our portfolio of clients is formed by members of the diplomatic corps, of multinational companies, that expect only the best when it comes to the services they receive. And we can deliver those services exceeding their expectations and surprising them with additional benefits. We work constantly to improve and diversify the services offered, so that an expat or a diplomat will feel at home from the first minute he comes to Romania. Carlyle also published a guide that is offered to newcomers, in which one can find all the relevant information about this country. Which are the development trends in property management? Daiana Voicu: This segment of services is at the beginning in Romania but has a high potential for development. The sector is getting more professionalized and responds to the increased demand for services from investors. We noticed lately that investors who own portfolios of either buildings or land in Romania and have not exited in time and are now stuck with some assets need a company that will professionally manage their investment and maintain the value. The lend banking service that Carlyle Properties offers will cover every aspect of managing the real estate portfolio, from
tax issues to maintenance and identifying ways of producing income from the existing assets. If I would have to describe the property management sector, I would have to say that it is quite difficult to activate in this market this is why a lot of companies have gone out of business. Which kind of projects does Carlyle Properties have in it’s portfolio? Alexandru Florea: We manage different types of buildings, from residential compounds such as Oxford Gardens to office buildings such as Platinum Business and Convention Center, Tanora Building and Cathedral Plaza and shopping centers – Tomis Mall. All these projects are premium buildings, with a strong emphasis on green developments and sustainability, according to USGBC (U.S. Green Building Council). Therefore, Carlyle has gained valuable expertise in developing and offering project management services for green buildings. The above mentioned projects are all in the forefront of green buildings development, incorporating state of the art technologies which save energy, water and increase the quality of living and working in them.
145 Erou Iancu Nicolae Street, Voluntari, Ilfov Tel: +40(0) 021.269.05.27; Fax: +40(0) 021.269.05.28 office@carlyleproperties.ro, www.carlyleproperties.ro
Platinum Business and Convention Center is the most advanced green building in Romania, in the process of receiving the Gold certification for green buildings from Leeds (Leadership in Energy & Environmental Design). Cathedral Plaza is another remarkable green building considering the land constraints on which is developed that applied for the Silver certification. On the residential side, Oxford Gardens benefits from the proximity of a beautiful forest , completed with interior gardens that enhances feeling of staying in the proximity of nature. The technologies used in this complex are focused on lowering the energy and water consumption, minimizing the impact on environment while offering an exceptional standard of living for its inhabitants. With everything we do at Carlyle Properties we aim to take our service level at state of the art quality.
expat relocation
“I am looking for comfort, security, green surroundings and a nice area. So far, in Romania, I have changed homes four times,” Jorg Riommi, creative director of Saatchi & Saatchi
“We have observed that benefits packages related exclusively to relocation have undergone a few changes. Budgets for moving personal assets have been cut too but the most significant change is in the reduced sums assigned to rent and school fees for children,” said Vuluga. Specialists from Delta Relocation Services have also seen differences in the make-up of services requested by the multinational companies compared with 2008. “Besides the lower volume of transactions due to the worldwide crisis, the number of departures, meaning foreign specialists relocating outside Romania, has increased,” said Oana Hanganu, managing partner of Delta Relocation Services. “We expect a 15 percent increase in the coming months in relocation services related to the income segment, comprising orientation and home finding services.”
Expats make beeline for Baneasa and Herastrau
The Romanian housing market is prepared to meet the requirements of expats, no matter their country of origin, said the Interdean official. Several relocation services providers agree that it is cultural differences that are the hardest barriers to overcome. For instance, traditional Japanese would typically try to find similar accommodation conditions and house design to their home country, according to relocation specialists’ findings. “For houses, the most popular areas
are Baneasa and Pipera. People who want to live in an apartment usually go for the Herastrau, Primaverii and Floreasca areas. Most want large living spaces in new buildings,” said Vuluga. According to the real estate company, most clients are looking for apartments with modern furnishing, usually with three rooms, located in northern Bucharest. Most in demand are buildings offering facilities such as pool, gym and spa. At DTZ Echinox, demand for such apartments and houses have remained constant but budgets have been cut. The agency covers the luxury residential segment in Kiseleff, Dorobanti, Aviatorilor, Primaverii and Herastrau, where renting a three-room apartment starts from EUR 2,500 monthly. The same areas can be found in the offer of real estate agency Vission House, which is specialized in luxury real estate services. “These areas are most popular with expatriates due to the easy access to highlyrated schools, kindergartens and commercial centers. According to Andrei Rusu, Vission House GM, this year has brought a 30 percent increase in transaction volume for the company compared with 2010. Rental prices in these areas range from EUR 800-1,200 for a two-room apartment to EUR 1,800-3,000 for a four-room flat. The Romanian housing market has developed fast in terms of provision of expat accommodation, according to Carmen Valeanu, relocation and immigration consultant at the Partners in Relocation (PIR) Group. However, specialists say that there is a gap between supply and demand in the real estate market. “Supply greatly exceeds demand for luxury apartments, but it is the opposite when it comes to villas and houses. This is due to the lack of recent activity in the sector of house-type residential developments,” said Hanganu.
For real estate agencies with special departments for relocations, the segment is boosting a very slow market. “Rental transactions for expatriates account for 35 percent of the entire turnover of our residential department,” said Raluca Plavita, senior residential consultant at DTZ Echinox.
Crisis prompts Eastern invasion
Multinationals’ lower budgets for relocating expats are a reality, according to companies. “Since the period before 2008, relocation packages for expatriates have suffered a cut of 15-20 percent. Companies have opted to bring in expats from Asia, especially India and China, rather than Western Europe and the USA, due to the latter’s higher salary demands,” said Carmen Valeanu of PIR Group. She added that the salary for an expatriate makes up an average of 60-80 percent of the total relocation package. Expatriates’ migration to Romania rises and falls in line with sector trends. According to the relocation services providers, last year saw demands for services involving expats working in industries such as energy, finance, production, automotive, pharmaceutical, IT and telecommunication. According to the Delta Relocation Services official, the firm saw an increase in the FMCG sector. Still, according to the company’s calculations, demand for relocation services has halved in the last two years compared to the period before 2008. ■
“Rental transactions for expatriates account for 35 percent of the entire turnover of our residential department,” Raluca Plavita, senior residential consultant at DTZ Echinox
30 The Diplomat July 2011
discount websites
Online discounts reaching their peak? After a period in which discount sites have become more and more active, specialists predict that the ongoing boom in these sites will temper during this year, and their number might get down from the current 40 by 2012, when the market is expected to reach its maturity. By Magda Purice
F
ancy having your car cleaned for half the price you’d pay at a regular cleaning services provider? Or maybe you would care for some teeth whitening, for a quarter of the cost of normal dental treatment? If that doesn’t appeal, how about a mega deal for hair treatment? Deal hunting is now big business. Last December, Groupon, the largest global collective buying services and discount integrating company, launched in Romania, two years after the group had first set up the business and developed it in 43 countries. At that time in Romania, there were already a few trial discount sites but once Groupon entered the stage, sites often dubbed “Groupon clones” flourished. According to official data from Netopia Sistem, the owner of mobile online payment platform mobilPay, about 40 websites are now providing discount and collective buying services. The firm says that 90 percent use the mobilPay online platform. The company made over 55,000 transactions involving discount sites in February, out
of 70,000. “The most attractive discount offers were for restaurants, cosmetics and beauty clinics,” said Antonio Eram, CEO of Netopia Sistem. He predicted that the boom in these sites will fade this year, and believes there will be fewer in 2012, when the market is expected to reach maturity.
The social network connection
Discount sites are connected to social media networks and integrated online communication platforms, so their evolution follows the online progress. Last year, after the tremendous growth of Groupon worldwide, the eye of internet giants like Google was caught and the IT giant made with an offer, estimated at USD 6 billion, one declined by the collective buying company. “Groupon has captured the power of social media and put it to work at a local level, providing a win-win for businesses and consumers alike. Members are loyal to the brand and incredibly engaged with merchants’ offers,” said Cem Tunakan, managing director of Groupon Romania. Half a year after the Google offer, Groupon announced its plans for an IPO (initial public offering), hoping to raise USD 750 million before listing on the stock exchange. Based on the company’s price calculation for a share, Groupon could be valued at some USD 15-20 billion, according to data on the market.
For Groupon, Romania is one of the promised lands in Europe, with a 20-mi‑ llion population and at least five big cities offering strong retail possibilities, according to Tunakam. After six months of experience in Romania, the firm identified its target: young, highly-educated women with a medium to high income, who want to experience the best stuff to do, buy, see and eat in their neighborhood. “Over 70 percent of purchasers are between 18 and 34 years old and over 50 percent have at least a college degree,” said Tunakan.
Who are the real deal hunters?
With cross market expertise, GoldenDeals, part of the Greek private equity investment group Global Finance, launched in Romania even before Groupon. In October 2010, the site opened for business locally, after launches in Europe in Greece, Bulgaria and Serbia. According to company data, GoldenDeals has sold over 50,000 vouchers in the Balkans and registered 750,000 subscriptions. In Romania, it has notched up 200,000 subscriptions so far, according to Franceso Benincasa, head of GoldenDeals International. “The right time to expand on the regional
“The right time to expand on the regional markets was 2010, because consumers are now more than ever looking for discounts,” Franceso Benincasa, head of GoldenDeals International
34 The Diplomat July 2011
discount websites
40
The number of websites which are now providing discount and collective buying services in Romania, according to Netopia Sistem
markets was 2010, par tly because consumers are now more than ever looking for the best deals on the market and discounts,” said Benincasa. According to him, the business model and target is still in the process of developing and the best marketing tools being identified. Still, based on its experience with Romanian consumers, it seems that women buyers are more active than men online and hunting for discounts. Top offer? “It is seasonal. We have partnerships for discount offers from services companies operating in tourism, beauty, cosmetics, restaurants and product providers in these industries,” said Benincasa. Among holiday offers, some of the most popular discounts are for city breaks, with the websites offering accommodation in three- and four-star hotels and pensions.
Word of mouth is best advertising
Integrated discount offers attracted both money and the interest of businesspeople known for their online activities, such as Calin Fusu, founder of social network neogen.ro and owner of discount site zumzi. ro, plus Mihai Seceleanu, the general manager of InternetCorp, who started the
kuponiada.ro pro‑ ject in late 2010. On kuponiada.ro, women make up 70 percent of subscriptions. According to Seceleanu, the website required an investment of EUR 500,000, including advertising support from the InternetCorp websites portfolio. “There are over 200 partners working with us every month,” said Seceleanu. With more than 130,000 fans on its Facebook page, far higher than on comparable websites, kuponiada.ro ties in with social media advertising. “There are few online specialists in Romania and social media is starting to mean Facebook,” said Seceleanu. Word of mouth generates a clear return, the GoldenDeals manager commented. “The importance of delivering and being serious in our business is crucial. A happy consumer brings another one,” said Benincasa.
Capital is key
Although Bucharest represents the core business, bringing most of the buyers, other cities in Romania have started to develop. kuponiada.ro earns 80 percent of its revenues from Bucharest, with the rest coming from buyers in Brasov, Constanta, Cluj-Napoca, Iasi and Timisoara. The Romanian scene is based on massmarket offers, according to Alina Moroianu, strategic support manager of Megabuy,
another new player. “Mass market products with very low prices sell like hotcakes,” she said. “Unfortunately, online in Romania is still way behind developed markets. The measurement systems are incipient and the conversion of visitors into buyers is expensive,” she added. According to the representative, as a newcomer in 2010, Megabuy had to face established competition so its investment in advertising and marketing tools for the business exceeded its initial estimation. “We do direct mailing, SEO and indexation and social media,” said Moroianu. The business is still developing and the market is moving slowly. GoldenDeals works with 17 specialists in computing and technology, both Romanians and Greeks. Mihai Seceleanu said that his firm works with a Romanian team, as in the case with all InternetCorp businesses. From a market with 40 websites so far and several big companies that have established an awareness, future market movements should bring consolidation, with some websites disappearing, others being taken over and some newcomers in the next few years. As many forums and discussion suggest, one of the biggest challenges for online shops, whether they sell products, services or discounts, is gaining consumers’ trust and delivering on their promise 100 percent. ■
“Over 70 percent of purchasers are between 18 and 34 years old and over 50 percent have at least a college degree,” Cem Tunakan, managing director of Groupon Romania
35
usa
US firms analyze state of market With American giants Ford, Smithfield, Procter&Gamble and Cargill having already set up base in Romania, companies like ExxonMobil and Chevron could follow suit in the next few years. The Diplomat – Bucharest asked top US companies how they are coping with local operations and what their investment plans here are. By Dana Verdes
“U
S direct investment in Romania continues to grow as new investments are announced and existing invest‑ ments are expanded,” Mark Giten‑ stein, United States Ambassador to Romania, said recently. Accord‑ ing to him, since 2008 American firms have announced USD 1.2 billion in planned future invest‑ ment in Romania. “Over 100 American companies here employ over 15,000 Romanians. US com‑ panies are involved in a wide range of activities, including IT, food and agriculture, auto‑ motive manufacturing, insurance, investment funds and consumer products,” he added. The Ambassador went on, “Romania is a great environment to attract investment: the cost of labor is low, Romanians are very talented and skilled, and the capital market is not suf‑ ficiently exploited. The expansion and devel‑ opment potential is enormous if you solve the pro‑ blems of trans‑
36 The Diplomat July 2011
parency. I know it is very annoying, but I’ll say this until I leave the post,” said Gitenstein on how weaknesses could become opportunities. In addition to the major investments by Ford, Smithfield, Procter&Gamble and Cargill, which have surpassed USD 1 billion in the past few years, Nadia Crisan, man‑ aging director with McGuireWoods Romania, says, “It is my understand‑ ing that ExxonMobil, Chevron and Honeywell will give a special focus to Romania in the next few years.”
Crisis puts brake on car production at Ford Romania
Carmaker Ford’s plans in Romania are far from those expressed in 2008 when it first came here. John Flem‑ ing, president of Ford Europe, said then that the Craiova-based plant was aiming to produce 300,000 cars in Craiova and 300,000 engines a year from 2012, generating over EUR 4 billion in revenues. Now it is a different story. “We are in discussions with the Romanian government and it is our hope that we will complete the negotiation process as soon as possible,” Nadia Crisan, also a member of the board of directors at Ford Romania, tells The Diplomat – Bucharest on the pos‑ sibility that the State could fine Ford for its failure to fulfill the privati‑ zation contract’s pro‑ visions. In the first five months of this year, Ford manufactured 3,680 Transit Connect units in Craiova. About 95 percent of the output was exported to the Western European market, as well as to Scandinavian countries.
Ford has invested over EUR 500 million just in the technology to sup‑ port the manufacturing site in Craiova, Ken MacFarlane, Ford of Europe VP for manufacturing, said recently. As the carmaker promised in 2008, and per the approval of the EU, Ford will invest in excess of EUR 675 million in the site. One of the main challenges in Romania, Crisan says, will be for the Romanian authorities to “improve the national infrastructure in the next couple of years to allow all investors to have efficient and easy access from and to the plants.” The com‑ pany announced recently that Ford Romania would begin making a new B-class model, aside from the B-Max, as soon as it stops production of the Transit Connect van, which will be moved to Spain.
IAC keeps the Bals rolling
Ford’s entrance on the local market has brought a number of significant global suppliers to Craiova, one being American company International Automotive Components Group Europe (IAC). “We chose to develop our invest‑ ment project in Bals, serving Ford Motor Company. Romania is a stra‑ tegic location, for its workforce poten‑ tial, geography and resources, as well as foreign investments in various sec‑ tors. Support from the authorities is also essential,” Maurits Willaert, vicepresident of operations CEE with IAC Group Europe, tells The Diplomat – Bucharest. According to him, IAC has sched‑ uled investments of EUR 25 million, of which nearly EUR 10 million worth have been already executed. “Since we broke ground in February of this year, we have been through a number of key phases, and we are
usa currently at the stage of finishing the roof and side walls. We will start to install machines in the second half of July. Building is planned to be completely finished at the beginning of next year. We are on schedule and we do not anticipate any delays in the completion of the site construction,” says Willaert. “On the human resources side, we have interviewed more than 300 people, both blue and white collar, out of more than 4,500 applicants so far. We have 14 people on board and another two to join by end of the month.” The IAC Group Europe official says that the company is currently “on track with the building plan and the supplier sourcing plan. Bottom line, IAC Romania is running busi‑ ness as usual.”
Delphi OKs fourth production unit
Romania is not new territory for automotive manufacturer Delphi. Currently, the company has more than 11,000 employees at its four local sites: three electrical or electronic archi‑ tecture plants in Sannicolau Mare, Ineu and Moldova Noua, as well as a power train diesel engine management system plant in Iasi. The Moldova Noua investment in Caras Severin County was announced recently by the American company. According to Delphi officials, the new site will produce wiring harness modules for vehicle manufacturers across Europe and will work closely with other Delphi facilities in the country. Employ‑ ment at the new plant could potentially reach 1,000 by the end of the year. “As we are a part of the dynamic automo‑ tive industry, our Romanian plants’ resources have been adjusted to follow our customers’ production schedules. Currently, Delphi plants in Romania are focused on the imple‑ mentation of their new production projects,” Cristian Gulicska, regional director for Roma‑ nia and Eastern Europe, told The Diplomat – Bucharest. ”Romania offers a good business environment for manufacturing high-tech components for the automotive industry. Del‑ phi’s investment criteria regarding Romania were to follow the group’s car manufacturer customers, appoint a skilled workforce, use the existing infrastructure and obtain local government support.” Moreover, drawing on Delphi’s experi‑ ence on the local market, Gulicska says, “The company has been operating in the country
1.05
billion euro – the value of American investments in Romania until 2010 according to the Romanian Center for Trade and Investment for 13 years already. Romania offers a great pool of well-qualified employees. With proper training, the local candidates adapt very well to automotive industry standards.”
Genpact bets on specialists
Genpact, which manages business processes for companies and is part of the American giant General Electric, is present in Romania with investments in two locations, Bucharest and Cluj, with over 1,400 employees. “We run our biggest European opera‑ tional centers in these two centers and our delivery spreads across multiple industries and services such as finance and account‑ ing, procurement, customer service, and col‑ lections. This year we have more than 200 job vacancies in Romania so we continue to invest,” Calin Avram, vice-president of operations at Genpact Romania, tells The Diplomat – Bucharest. As in many countries and sectors, the crisis has affected the company’s operations on the local market. “We saw the impact in terms of volume reduction, price and produc‑ tivity pressures,” says Avram . “We increased our clients’ bottom line through continuous process improvement, and have also built new platforms for quality, productivity and growth. We also took internal measures to reduce discretionary spending. There were also positive aspects that we realized like the ease of tapping into the labor market.” Away from the crisis, Avram believes that there are a few aspects Romania has to deal with in order to raise foreign investors’ interest in the local market. “One of the biggest impediments for us and any investor would be the political, leg‑
islative and fiscal instability that creates dif‑ ficulties in establishing a long-term strategy. Also, we have faced challenges in finding the right level of local mid and top management,” Avram adds.
Franklin Templeton deplores capital market’s low liquidity
One of the main obstacles the US investment fund Franklin Templeton has encountered on the local market is the low liquidity and scarcity of large issuers on the Romanian market. “The listing of the Property Fund has meant a great improvement in that sense, quickly becoming the most liquid share on the BSE. The IPOs (Romgaz, Hidroelectrica, Nuclearelectrica) and SPOs (OMV Petrom, Transgaz, Transelectrica) announced by the Government will definitely help the market develop and attract more investors,” Greg Konieczny, manager of the Property Fund and executive vice-president at Templeton Emerging Markets Group, tells The Diplomat – Bucharest. Another disadvantage encoun‑ tered here, he adds, is “the rather loose cor‑ porate governance practices especially in the case of some state-controlled companies.” Currently, Franklin Templeton’s man‑ date is to actively manage the investments of the Property Fund. The main objective is to achieve long-term capital appreciation via investments mainly in Romanian equity or equity-linked securities. “As far as the Property Fund is concerned, we were interested in elements such as the privatization process of state-controlled companies in the underlying portfolio, the potential for efficiency improvements in statecontrolled companies as the profitability of such companies is significantly below that of their peers, and the expected pace of the restitution process and estimated timing of the government losing control over the fund,” adds Konieczny.
“Over 100 American companies employ over 15,000 Romanians. US direct investment continues to grow as new ones are announced,” Mark Gitenstein, United States Ambassador to Romania
37
usa Google searches for local entrepreneurship
an increasing trend of surfaces sown with certified seed at the expense of cultivated land with uncertified seeds,” Gabriel Baeasu, Monsanto Romania GM, tells The Diplomat – Bucharest. In 2006, the Americans from Monsanto started the construction of the largest processing station for corn and rape seeds. The investment, which reaches USD 115 million and is the firm’s total investment in Romania, is also its largest investment in the Europe-Africa region. The processed seeds – annual production reaches 1.65 million bags – are to be sold both in Romania and Russia, Ukraine, Spain, Bulgaria. Monsanto currently employs 120 workers.
Since November 2010, Google has had an official presence in Romania. After launch‑ ing over ten localized consumer products for Romanian users and advertising products for businesses including AdWords and AdSense, Google set up a business office in Bucharest with a local team overseeing its presence and strategy in Romania, establishing business relationships with local partners, educating local companies about the benefits of going online and doing direct advertising sales. “Google’s aim is to provide Romanian users, who are very active online, with more useful and innovative tools in the local lan‑ guage, as well as help Romanian companies Prologis fights low get online and develop their business using demand for industrial the Internet,” said Dan Bulucea, Google’s “Romania is a promising market, with big country manager for potential for growth Romania. He added: and development. “We all know how the There is still room for internet has changed newcomers and new the way people access investments on the information and com‑ industrial real estate municate. Now for the segment. As long as first time we can see there is demand and how its adoption by companies show inter‑ Greg Konieczny, manager of the Property Fund and executive companies has become est in leasing industrial vice-president at Templeton Emerging Markets Group a major contributor to space, the Romanian months before we are paid for our seed. This GDP, making the internet a central pillar of the market could easily rise to the level of larger represents a certain risk for us, which can be economies. A large proportion of this growth markets in the area, such as Poland and the significantly reduced through a functioning will come through small businesses.” Czech Republic,” Laszlo Kemenes, Prologis Google data reveals that small and agricultural credit market. But our experience market officer for Hungary and Romania, medium enterprises that use the internet to shows that the finance sector is quite reluctant says of the local market where the firm has promote their products and services or to to invest in agriculture.” been present since 2005. sell online generate more revenues hire more Altogether, the American company has He adds, “The only problem we are cur‑ people and export more than those that do not invested about USD 40 million in Romania, rently facing on the Romanian market, in use the Internet. mainly in seed production. This year the firm terms of business, is the low level of demand “It is important to grow the culture of has doubled the area for seed production for for industrial space. Compared to other coun‑ online entrepreneurship across Romania, so both corn and sunflower. According to the tries from the CEE region where we operate, that it will yield great results for many people. agricultural market research firm Kleffman, like Poland, the Czech Republic and Hun‑ Our strategy is based on helping people and last year the company had a 35 percent market gary, in Romania the demand is still low businesses benefit from the growth of the share in corn, 42 percent in sunflower and 19 and investors are cautious. And these two internet. Google creates economic opportu‑ percent for canola. particular aspects are the main reasons why nity, driving web traffic, customer queries, Dochev says that growth in breeding the Romanian industrial real estate market is advertising revenues and sales to businesses, research and seed production remains the recovering more slowly than similar states in content owners and publishers,” says Bulucea firm’s key plans in Romania. “We are plan‑ the CEE region.” of Google’s plans for the local market. According to Kemenes, given Romania’s ning a more than USD 10 million investment uncertain economic situation, for the time in a sunflower seed conditioning facility in Pioneer plans being Prologis – which has an 11 percent Afumati,” adds Dochev. market share – is not planning any additional production expansion “The two major problems we are facing in Romania sows seeds of investment. Moreover, Prologis Park Bucha‑ Romania are the still high ratio of farm-saved growth for Monsanto rest A1 is currently 100 percent let. seed and the under-financed agriculture,” says Since the beginning of its activity in Romania, “Considering Prologis’s plans for the Chavdar Dochev, operations manager for Bul‑ Monsanto has been confronted with an ever future, we are currently concentrating on garia, Romania and the Republic of Moldova targeting pre-let/BTS opportunities on our changing market. “In the last two years we with Pioneer Hi-Bred. have seen a positive trend in terms of both 28 hectares of land adjacent to Prologis Park “Our goal is to convince Romanian farm‑ quantity and quality. The corn market, which Bucharest A1, which allows for 180,000 sqm is the main focus of our company, has steadily ers that it is worth planting certified hybrid of additional development,” said the Ameri‑ seeds. With the current commodity prices, the increased in quantity due to international fac‑ can company’s market officer. The estimated investment in hybrid seed pays off very well,” tors, such as high crop prices, expanding the total investment value of Prologis’s project in says Dochev. “The other thing is that what we sales market and broadening the spectrum of Romania is approximately USD 72 million, are doing is a credit business, it takes several use. On the qualitative side, we have identified says the company. ■
“We were interested in the privatization process of state-owned companies and in the expected pace of the restitution process,”
38 The Diplomat July 2011
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france
Vive les investments! Companies such as BRD-Groupe Societe Generale, Orange, Air France KLM, Renault, Sanofi Aventis, Apa Nova and Michelin have announced hundreds of millions worth of investment in Romania despite the turmoil. With bilateral trade of EUR 5.5 billion last year – a 23 percent hike y-o-y – France is a solid foreign investor on the local market. The French Ambassador to Romania, Henri Paul, is optimistic and expects further trade growth, as a competitive boost is witnessed in Romanian industrial supply. By Magda Purice
H
ighly active in all Romania’s important industry segments and key economic sectors, French companies had accounted for EUR 7 billion of investments at the end of 2010, according to figures provided by the FrenchRomanian Chamber of Commerce and Industry (CCIFR). After a decline of 11 percent in bilateral trade in 2009, French exports to Romania have returned to a slower pace than imports from Romania and increased by 15.1 percent last year, reaching EUR 2.51 billion. At the same time, Romanian exports on the French market, driven by the success of Dacia – which hit the road with the Duster model – rose by 30.4 percent to EUR 2.99 billion. Despite the last years of economic downturn, Romania has seen two new French entries this year: the launch of the Romanian subsidiary of AXA (AXA Asigurari) and the opening of the first Leroy-Merlin store in the country. “French companies have thus retained their confidence in Romania and I note that those that were already present before the crisis have continued to invest, albeit at a slower pace than seen in Romanian industrial supply,” Henri Paul, French A m b a ‑ ssador to Romania, tells
40 The Diplomat July 2011
The Diplomat – Bucharest. The return of growth and consumption in Romania could also boost French exports and allow a more balanced level of trade between the two countries, according to Paul. Still, the beginning of this year
7
billion euro is the level of French investments at the end of 2010, according to the French‑Romanian Chamber of Commerce and Industry brought some bad news, with gas and electricity supplier GDF Suez withdrawing from the expansion project at the Cernavoda nuclear plant and difficulties encountered by the large French multinational conglo‑ merate Alstom in its contract with the local transportation company Metrorex.
‘Help me to help you’
“France has never stopped behaving as a faithful ally to Romania over the years,” said the Ambassador, of the countries’ diplomatic relations. A few months ago, the prospect of Bulgaria and Romania joining the European Schengen zone provoked discontent in Romania about the outspoken opposition of Finland, Germany and France to the move. “On a political level, we have had disagreements; it is a true and public matter – perhaps a bit too public. But this is normal between two countries with such strong
bonds. We should not give these disagreements an exaggerated emotional significance, because there is nothing that friends cannot work out by speaking frankly and trying to understand each other’s points of view. Eventually, we got over that stage,” said Paul. In June, Claude Gueant, the French minister of internal affairs, said that Romania and Bulgaria would join the Schengen zone in two stages, the first to come in September this year, with the opening of airports and harbors, followed by the opening of land borders in 2012. However, a decision will be made in September, according to the French official. “Allow me to point out, without exaggeration, that France was the best advocate for Romania joining the OIF (Organisation internationale de la Francophonie), NATO and the EU,” added the Ambassador.
How not to attract EU funds
Romania has had a low absorption rate of European funds in the last few years, at 8.6 percent of the total allocated budget registered in late 2010, compared with the average European rate of 17 percent, according to a report by the Fiscal Council in Romania. The French Ambassador says that some funds are absorbed more easily than others, but the overall rate is too low. “This is partly due to the complexity of administrative records, but also to other factors: inadequate decentralization, inappropriate investments and the abuse of bureaucracy. The risk is serious not only for reimbursement, but also the reduction of the pot, especially as we approach a period of renegotiation, as part of the European Union’s revised budget. France will support Romania certainly, but I would use an expression dear to one of my former bosses: help me to help you.” In terms of actual help and at the
france Ambassador’s initiative, French businesses in the energy sector have created a working group that developed a White Paper on energy, making ten what it describes as practical and achievable proposals, to develop the potential of the main sectors of the local economy, and better serve consumers. These measures are currently in the hands of the authorities and businesses are at their disposal to work on their implementation, according to Paul.
France vs Romania – the crisis files
France is dealing with the difficult economic conditions differently than Romania because of its very advanced welfare system, which has cushioned certain effects of the crisis, but still, its debt has soared to a very high rate, according to the Ambassador. “The French banking system has coped very well. The unemployment rate is again very high and youth unemployment in particular is still worrying, especially in certain urban areas. But I would say that France is among the European countries that knew how to find a suitable response to the crisis, by focusing on investments and value creation and rejecting tax increases, which was the personal option of the French president. In addition, we have multiplied reforms and slimmed down the State,“ said the French diplomat. In comparison, Romania has been subjected to austerity measures which are not yet finished and which have reduced spending power, even with inflation still high. In Paul’s opinion, tax increases were necessary to rebalance public finances, as were the drastic budget cuts. “I admire the way Romanians have accepted these sacrifices. The support from the EU and the IMF seems to have enabled them to overcome this difficult patch. Romania is now ready to resume growth, but it will have to get in the right state to absorb the European funds available and receive foreign investments. To put it briefly, one gets out of the crisis by investing,” the French Ambassador concluded.
French firms plough on
To a point, business activities seem to be rebounding on the Romanian scene, even if this is not yet being felt in consumers’ pockets, in fact quite the opposite. Still, French investors are not voicing anger over the local business conditions, merely bearing them and trying to adapt business plans and strategies. Industries like pharmaceuticals, automotive, transportation, power, banking and telecommunication are still strong grounds for France to be Romania’s third biggest contributor in terms of business this year. 42 The Diplomat July 2011
“On a political level, we have had disagreements. We should not give them an exaggerated emotional significance,” Henri Paul,
French Ambassador to Romania
Sanofi Avensis Romania looks for healthy growth on foreign markets
Despite a very difficult business environment and a changeable regulatory background, one of the largest pharmaceutical producers in Romania, Sanofi Avensis, ended last year with sales of EUR 207 million, according to the market analysis company Cegedim Romania. Its plans for this year are to focus on the key medicine sectors and increase production and exports, after five years when its entire production went on the local market. “The last two years have been extremely difficult for players on the pharmaceutical market, with a series of fast legislative changes adding to the already existing financial crisis and forcing companies to rethink business strategies and plans,” said Dan Ivan, country head of Sanofi-Aventis Romania. Some of the current obstacles on the local market are the increased taxes,
clawback tax, double reference prices and delayed payments which exceed the official data on 180- and 210-day terms. According to the manager, following Ordinance 75, Romania has the lowest prices for medicines in Europe. Another bane for pharmaceutical producers in Romania is the double reference prices of generic and original medicines. “There is a risk that some producers will scale back their presence on the Romanian market,” said Ivan. Since its takeover of Zentiva in 2009, Sanofi Avensis, which has a 9.1 percent market share, produces over 100 million units at its facility in Bucharest, meaning 2 billion pills yearly. According to the calculations, one of eight medicine units distributed in Romania comes from Zentiva’s production facility. The site is also responsible for 70 percent of the sales making up Sanofi Avensis’s total trade on the local market. The facility has attracted investments exceeding EUR 10 million in the last five years. Starting this year, Sanofi Avensis will make 20 new products at its Bucharest unit, with 11 of them being fully produced locally and 8 being tested, packaged and distributed on the Romanian market. The exports started with one product this year which went to Germany, the pharmaceutical group’s second largest market, estimated at EUR 90 million. According to the company, the second half of this year will bring the export of five more products to the German and British markets. “We have another 20 products being subjected to feasibility studies and we are very optimistic about our ongoing projects,” said Ivan. According to him, the exports should raise production by 30 percent, to 65 million units yearly. Over 10 percent of the group’s sales in Central and Eastern Europe are generated in Romania. In 2010, Sanofi Avensis registered total sales of EUR 30.4 billion in over 100 countries worldwide where the company has operations.
Michelin rolls out two-digit business hike this year
French group Michelin, the world’s leading tire manufacturer, came to Romania 10 years ago, and has found it promising territory. “As an emerging market, Romania has seen premium tire brands develop quicker than the lower budget category,” said Eric Faidy, president of Michelin Romania and the Balkans. The manufacturer established a local office by acquiring the Victoria Floresti plant from Romanian company Tofan Group in 2001. Soon after, it acquired another production unit, Silvania in Zalau, and in 2004 it developed a greenfield production unit for metal string in the same city. After 10 years,
france
7
million euro is Sanofi Avensis’s investments in Romania in 2010-2011, of which EUR 4.7 mln to be invested this year during which it has produced more than 450,000 tires and invested EUR 265 million locally, Michelin’s facilities in Romania currently employ 3,000 workers. In Q1 this year, according to the company’s calculations, the premium tire market grew by 10 percent y-o-y, with an increase of over 20 percent on the ultra-high performance segments. According to Faidy, this is “linked to the national program for the replacement of old cars as well as the consumer’s increasing awareness of the importance of tires for their own safety. This year, the company expects a 13 percent increase in the tire market for passenger vehicles.
European markets drive results for Renault Dacia
The success of the locally produced Sandero and Duster brands has brought the French company over 20,000 sales in Europe. According to the European Automobile Manufacturers’ Association (ACEA), Dacia sales in Europe registered growth of 18.7 percent in Europe, based on data provided at the beginning of 2011. In the meantime, Renault sales dropped by 8.9 percent. In 2010, Renault-owned Automobile Dacia continued to produce family car the Logan, hatchback the Sandero and SUV the Duster, together selling over 310,000 units – a 19 percent rise on the previous year. In 2010, Automobile Dacia exported to 77
3,000 63.6 the current number of Michelin Romania employees, after EUR 265 million investments on the local market
mln is the number of Air France KLM passengers in Romania in 2010, when the firm’s turnover reached EUR 23.6 billion
countries and territories, selling 228,000 vehicles in Western Europe. France is the top market, with over 110,000 units sold and a market share of 4.12 percent. The second largest export market is Germany (40,300), followed by Italy, Turkey, Algeria and Morocco. In Romania, the Dacia brand has a 31 percent share of the car market. For the coming years the factory will continue to produce at full capacity, meaning 350,000 vehicles per year.
tomers and attract new ones, the manager said the carrier had managed to cope by developing a hybrid between the economic and business class cabins, Premium Voyager, launched before the crisis. This class allows economy passengers to enjoy greater comfort for an extra sum. Last year, Air France slashed the prices of its flights in Europe by up to 20 percent.
Air France KLM continues through economic turbulence
Joint French-Dutch airline Air France KLM saw a six percent increase in passenger tra‑ ffic into and out of Romania at the beginning of this year, according to Alexandru Dobrescu, country manager at Air France KLM Romania and Moldova, mainly attributable to multiple group programs for passengers. The company relies on revenues gene‑ rated by business traffic thanks to a solid corporate segment - represented by the big multinationals operating in Romania -, according to the manager. The airline – which has a 17 percent market share – has adapted to the business realities in Romania and saw potential in the SME segment. With its two hubs in Paris and Amsterdam, the airline has not seen major changes in traffic this year for its two top tourist destinations. However, demand for European destinations is up compared with long-haul, due to smaller budgets. “This is the main change brought about by the recession. Our passengers have preferred to take shorter holidays, mostly long weekends in the big European cities,” Dobrescu commented. The business class segment has contracted significantly. With various loyalty programs, intended to keep current cus-
BRD targets high-net worth customers
In April, the bank’s board of directors approved this year’s budget for revenues and expenses, a program which also stipulates the opening of seven branches dedicated to “Haut de gamme” clients. According to the document, five of the agencies are already operational. “Last year, the main business objective was to continue to be present in all the markets and help our customers to carry out their projects with a different background,” said Guy Poupet, chairman & CEO of BRD-Groupe Societe Generale. This year, the lender plans to increase deposits from private and corporate clients by 5 to 10 percent, having marked an increase of 0.5 percent in the deposits of private clients and, subsequently, a 3.4 percent rise in the corporate sector compared to 2010. It also intends to invest more in real estate and monetics. In 2010, the bank invested EUR 30.8 million, of which EUR 12.2 million represented real estate spending while the rest went into monetics and IT technologies. In 2009, the French lender reported EUR 38.8 million of investments. Regarding the overall economic landscape in Romania, the bank forecasts GDP of 1.5 percent and an inflation rate of 5 percent in 2011. “At the same time, banks faced the widespread phenomenon of unpaid debts coming from both private customers and companies,
“Banks faced the widespread phenomenon of unpaid debts, which increased the cost of risk and brought about lower profits,” Guy Poupet, chairman & CEO of BRD-Groupe Societe Generale
44 The Diplomat July 2011
1.7
8
which increased the cost of risk and brought about lower profits. Hopefully, however, once the economic recovery resumes, banking will return to better levels, but it is quite hard to believe that we will see 2007 and 2008 repeating very soon,” said the CEO.
year, while in Q1 it announced a turnover of EUR 222 million. According to the firm, Orange has increased its value share, and the broadband segment has expanded. The company’s distribution network reached 181 franchises in the Orange store network. With approximately EUR 500-600 million of investments planned through to 2015 and EUR 110 million for this year alone, the operator is focusing on modernizing its rural network and expanding broadband services for rural areas. The project began this year and should finish by the middle of next year. The objective is to have 98 percent of the population covered by mid-2012. So far, Orange has 2G coverage in 13 counties in Romania and has started expanding its 3G coverage, which offers a download
billion euro is Orange’s percent is the French total investments in company Cegis Romania so far, with Imobiliare’s market share operations on the market in the Romanian property employing 2,700 management sector
Orange to dial up more half a billion euro of investments by 2015
Summer is bringing top management changes within the telecommunication company, with Jean-Francois Fallacher, the company’s new CEO, replacing Thierry Millet. The operator’s focus in 2010 was to counterbalance falling income and customer numbers, trends that were noticeable across the entire market. The company reported a turnover of EUR 973 million last
85
france
million euro is the sum French company Ana Nova plans to invest in the water supply in Bucharest speed of up to 14.4 Mbps also in the rural areas targeted for expansion by the end of next year.
Cegis Imobiliare’s projects still halted
The Romanian operations of French group Cegis have undergone several transformations in 2010, when the company’s portfolio saw changes and dropped a number of administrated commercial centers, Pro‑ menada Mall in Focsani, Felicia shopping center in Iasi and Era shopping center in Oradea. Currently, Cegis manages three commercial centers in Bucharest: Orhideea, Esplanada and Carrefour Colentina. In 2009, Cegis started to manage the commercial gallery Carrefour opened in the retail park Parcul Comercial Militari in
45
france Western Bucharest. The group entered the local market in 2003, joining Vinci company in the construction of the Orhideea commercial center in Bucharest. In 2009, Cegis ceased administration activities at Bucharest-based Grand Arena Mall Berceni, owned by the construction and development company Euroinvest Intermed, with French shareholders. “The objectives in 2010 were to increase the company’s portfolio and to improve the services delivered to the customer. The crisis has halted the secondary objective of development, but the improvement of services has remained as a main objective,” said Jibril Semour, the new manager of Cegis Imobiliare in Romania. The company reported a turnover of RON 4.3 million for last year, while in Q1 this year the results are poorer: turnover reached RON 358,272.
Apa Nova sails towards national expansion
and is facing challenges that are similar to those of many other countries,” said Eric Stab, president & CEO of GDF Suez Energy Eastern Europe and president GDF Suez Energy Romania. He has identified several optimizations for the gas sector, including “diversifying sources and routes of supply, developing storage, improving gas transportation and distribution networks,” listed Stab. He gives the examples of France, Germany and Belgium, which have diversified supply sources and where there is an well functioning wholesale market.“Romania, due to its consumption structure, needs a lot of flexibility, and current storage facilities, which are built on depleted production fields, do not fully meet peak demand, which is covered by Russian gas supplies,” said Stab.
“We have the infrastructure solutions for electric cars, the needs are being met with the support of the authorities,”
Schneider Electric focuses on electric solutions supply in Romania
With two leasing contracts The global specialist in in Romania, a 25-year one to energy management solutions expects electric cars to manage the Bucharest water supply and another 11-year make up 15 percent of the Saulo Spaolanse, country president at Schneider Electric deal to run Ploiesti’s water total within 15 years, accordsystem, Apa Nova, the Romanian subsid- power at Alstom. “In the field of power ing to Saulo Spaolanse, the new country iary of French company Veolia Eau is one of generation, we are currently in the pro- president at Schneider Electric Romania the best known private-public partnerships cess of commissioning the EUR 93 million as of the beginning of this year. In RomaRovinari thermal power plant units 3 and nia, the manager foresees around 1 milsigned in Romania since 2000. Recently, Apa Nova Bucharest announ‑ 6 desulphurization equipment, which will lion electric cars from a total of 8 million ced it would start a EUR 39 million three- help the power plant comply with European within the same period of time. “We have year program to modernize the waste water environmental legislation,” said Chevrier. the necessary infrastructure solutions for collection unit in Bucharest. In the next six Alstom’s business in Romania also inte- electric cars, the technologies are rapidly years, it also plans to invest another EUR grates into grid activity, following the evolving, the needs are being met with the 46 million in water pipeline network expan- acquisition of the transmission business support of the authorities, their incentive from Areva and creation of the new grid programs and their cooperation with the sion. “The company is continuing its invest- sector. Its local customers are the largest industry,” said Spaolanse. ment plans for the two cities but is also look- energy systems providers, Transelectrica, Partnerships between car producers ing at possible openings in other Romanian and energy systems providers have started Electrica, EoN, CEZ and Enel. Alstom is towns. Romanians are among the best con- also interested in the tramway market (roll- already, with Schneider Electric having recently signed a joint agreement including tributors and taxpayers in European coun- ing stock and maintenance) in Bucharest tries,” said Bruno Roche, the company’s Renault, Electrica and Siemens to develop and other large Romanian cities. The firm GM, who is also the president of the French the local infrastructure of electric cars. is considering participating in the tenders Chamber of Commerce in Romania. How- for subway trains announced along with According to the manager, the compaever, Roche sees large investment opportu- the subway system development, the first nies have started to lobby together locally. nities in Romania, due to labor force avail- of which involves trains intended for the In Europe, Schneider Electric has already Drumul Taberei-Universitate line in Bucha- implemented infrastructure for electric ability and the real need for infrastructure rest, forecast to take place this year. cars in cities like Brussels, Anvers and in the major economic fields with a direct Namur. In Bucharest, through its divisions, impact on the public. ‘Vary the sources and Schneider Electric has provided the energy High voltage French routes of gas supply,’ GDF systems for commercial centers such as Suez advises City Mall and Sun Plaza, and also serves business power Alstom, the French conglomerate of power In Romania since 2005, GDF Suez Group the residential segment, hotels, retail, hosand transport services, is running local has invested close to EUR 700 million pitals, oil and gas, through its divisions. partnerships for large projects in the energy locally. Its investment plans have not seen Recently, the company launched a cusand transportation sectors in Romania and tomer care center for its IT division, which major changes in recent years, according the company is here to stay and grow its to the company. “The Romanian energy operates as a hub client service center in project portfolio, according to Jacques market is one of the most important in Bucharest for customers in 30 European countries. ■ Chevrier, country president & head of Europe, has very good potential to grow 46 The Diplomat July 2011
switzerland
Swiss franc about local market obstacles A
bout EUR 1.1 billion – this is how much Swiss companies had brought onto the local market by 2010. The Country of Cantons occupies eighth place among the biggest foreign investors, according to a report by the Swiss Embassy in Romania. It seems a good sum but is it good enough? Even if the Central Bank’s statistics – which hike Swiss investment in Romania to EUR 2.1 billion by the end of 2009 – are used instead, Romania is still lagging some way behind other CEE countries. Among regional recipients of Swiss investment, Russia ranks first, followed by Poland, both with almost 5 billion Swiss francs. Romania comes fifth in the table. Switzerland has a strong presence in most sectors of Romania’s economy. There are currently 46 Swiss companies active in Romania, including Intercontinental, Nestle, Novartis, Roche, Swisspor and Rieker. The cement producer Holcim and the FMCG group Nestle have both invested in major local production facilities. Holcim has opened two cement factories in Romania, one in Campulung, and the other in Alesd, a grinding facility in Turda, and 20 ecological concrete making stations. This was done with a total of EUR 600 million, invested over the 14 years that Holcim has been present on the Romanian market. In turn, Nestle
Romania has over 500 employees, 20 of whom work in a factory in Timisoara. The company has been present in Romania for over 15 years. But Swiss funds didn’t get to Romania by investments alone. Last year, Switzerland approved financial aid of EUR 190 mln to help Romania and Bulgaria narrow development gaps between the two countries and the rest of Europe. Around EUR 135 mln of this contribution was designated for Romania. The country can use the money to finance projects in environmental protection, infrastructure development or stimulating the business environment.
Swiss investors eye Transylvania
Western Romania is becoming increasingly attractive to Swiss investors, from the Banat region all the way to Sibiu and Brasov, in Transylvania, where there is interest in agricultural development, forestry and manufacturing. This is helped by the familiarity with the German language and culture. Swiss investors here are also looking for cheap labor and betting on the local market’s potential (Romania is one of the biggest markets in the region), as well as on sectors that are currently undergoing development and technological upgrading processes.
However, Romania’s high level of bureaucracy continues to deter some. Corruption and the lack of transparency are also keeping Swiss firms from entering the Romanian market, especially since the political scene is unstable. “For Swiss companies, legal stability and transparency is the single most important issue,” the Embassy’s study
1.1
billion euro is the value of Swiss investment on the local market in the past 20 years until 2010 says. “Also crucial are efficient bureaucracy, exchange rate stability and a skilled labor force.” Swiss officials are urging the Romanian authorities to keep the country attractive to investors who want to expand to the region, otherwise they might go to countries like Ukraine and Bulgaria. A strategy for attracting investors, keeping political and legislative stability, reducing bureaucracy, 47
switzerland and simplifying and clarifying the legislation are all on the must-do list. What is very important, according to investors, is the setting up of a “one-stop-shop” for companies that come to Romania. “In other countries there is an office that deals with investors, helps them with information, and negotiates some discounts on taxes for the next five-ten years. In Romania there is no such office,” say Swiss Embassy representatives.
Holcim cements its development with premium products
Jacques Reber Swiss‑Romanian Chamber of Commerce president What are the key factors that make Swiss investors come to Romania? Romania is an attractive market for Swiss investors for many reasons. The first one is the size of the market. With 21.5 million inhabitants, Romania offers the biggest potential in the region, but the market is still lagging behind in terms of development. Therefore we can expect solid growth in the future in all sectors. Secondly, Romania is perceived as an attractive place for production to supply the entire European market. Labor costs are still relatively low and well qualified workers and managers are widely available. What are the hindrances that Swiss investors encounter in Romania? The major concern for Swiss investors – actually for all investors – is the lack of visibility and predictability in the legal and fiscal frameworks, the poor infrastructure, as there are many bad roads and practically no modern highways, plus the heavy-handed and non-transparent administration. Corruption may also be perceived as an obstacle for foreign investments on the local market. What other potential fields of interest for Swiss investment do you see? Swiss investors are present in Romania in a large variety of activities such as construction, services, the food industry, human resources, consulting, pharmaceutical industry, energy and textiles. We are convinced that Swiss investors will take advantage of the Romanian market development by continuing to invest in many different sectors. Preferred fields of activity are: agriculture (bio-agriculture, mineral waters and dairy products), energy (renewable energy, green energy or simply energy trade), and mechanical parts production.
48 The Diplomat July 2011
Lack of investment in the industry, real estate and construction sectors have hit the local cement market, and the results of the Swiss cement producer Holcim Romania stand as proof of this. The company registered a turnover of EUR 200 mln last year, down 20 percent from 2009, mainly due to the difficult market conditions. “During a crisis, customers become increasingly sophisticated, more careful about the pro‑ ducts they use and their quality,” says Daniel Bach, Holcim Romania GM. As such, after a 2010 which meant cost management, production optimization to market needs and cutting the number of employees by 100, to 1,100 – after layingoff another 200 staff in 2009 – the Holcim Romania GM announced EUR 35 mln of investments this year, up 75 percent on 2010. The money will be allocated to the development of environmental and energy efficiency projects, as well as to the modernization and maintenance of its equipment. “We have put a lot of effort into developing premium products in order to satisfy the needs of the market, and one result of these efforts is the launch of the Structo Plus cement,” says the Holcim official. “The new cement is a premium quality product, ‘built’ to customers’ needs, available countrywide, and with a bag weight and validity term adapted to customers’ working practices.” This year, Bach has seen some signs of recovery. The company’s sales increased in Q1 this year, compared to the same period of 2010, mainly due to the favorable weather which facilitated the continuation of certain construction stopped or delayed in the past. “It’s still risky to speak about the sustainable recovery of the market, but one positive sign is that there is currently a significant number of infrastructure projects planned, which if launched will help not only with the recovery of the construction market, but also with that of the economy,” says the GM. “We are hoping for such an evolution, because on the construction market, the proper use of materials and the responsible development of constructions are essential.”
Franke Romania pursues nationwide presence
After two years in which the crisis and Romanian government measures – the VAT boost – have cut home appliance sales by half, Florin Porojan, manager of the Romanian branch of Swiss appliance maker Franke, tells The Diplomat – Bucharest that there is hope for recovery in 2011. For Franke, this year’s outlook seems better, he believes. “We are estimating a 10 percent increase in revenue, especially since business is expected to improve in H2 of the year,” Porojan says. He adds that there is still potential for growth in the embedded home appliance market. “Embedded appliances are an ideal solution for apartments in Romania, because they can fit into very small spaces and can be arranged in a great variety of ways.” Also for this year, Porojan has planned a EUR 100,000 investment to extend the firm’s nationwide network of showrooms, taking it from the current 12 to 25. “We already have three showrooms in Bucharest and we want to open another one. The rest of them will be in big cities across the country, like Cluj, Timisoara, and Constanta.” As Porojan says, what really hit home appliance sales was the VAT hike in July last year, as in H1 2010, Franke’s business saw a slight increase – of a few percentage points – from the same period of 2009. “In the first few months sales were 10 percent better than in 2009, but after the government’s anti-recession measures came into effect, the market declined dramatically, so that at year end we actually dropped a few percent from 2009,” Porojan reports. The Franke Romania manager says that the increase in VAT overlapped with a rise in the price of embedded appliances, in turn due to a spike in the cost of raw materials. Franke official says that the company will continue exporting appliances to the Republic of Moldova, where the market is growing at a constant rate. Until last year, the firm was also exporting products to Serbia, but deliveries were halted. “For people over there it’s easier to import from Italy, where it’s cheaper,” Porojan comments.
ABB focuses on energy efficiency and robots
Romania remains a high-potential market for Swiss group ABB, a global leader in electrical and automation technology, which hopes to register business growth this year. “In 2010 we registered the same growth as in 2008. But this year we want to grow a little bit faster than the country itself,” Peter Simon, country manager of ABB for Romania, Bulgaria and Moldova, tells The Diplomat – Bucharest. The Swiss company has operations in three lines of business on the local market. In the
switzerland
“After the government’s antirecession measures, the market declined dramatically last year,” Florin Porojan, Franke manager
field of energy, it deals with the upgrading of the electrical network and connecting electricity producers to the national grid. “This is a big part of our business as Romania currently has huge potential, despite the unclear law on renewable energy,” Simon says. “We also started a wind farm project in Constanta in 2000-2002, and we couldn’t implement it, because there was nothing back then.” The company also offers energy efficiency services. “In power generation, there is huge potential to increase efficiency and the same is true for efficiency in the industry,” says the ABB manager, who adds that “people in Romania waste too much energy.” The company’s third line of business is the delivery of robotic equipment for Romanian factories. “We have now more than 250 ABB robots installed in the country, working 24 hours a day,” says Simon, naming clients as Renault or Danone. As a representative of a major investor group in Romania, Simon believes that infrastructure, administration, reliable taxes and legal stability are the most important things for investors when settling on a country. “When investors come, they come to make money. If they see the potential to make money, they will come.”
Roche Diagnostics sees growth in new technologies
The Romanian diagnostics division of the Swiss company Roche finished last year with a 10.2 percent increase in turnover against
2009, reaching RON 86.9 million. Expectations for the year to come are moderate. Harald Wolf, country manager at Roche Romania’s diagnostics division, expects sales of RON 90 million this year. “2010 was the first full year of activity for the diagnostics division on the Romanian market. It has been a year when we consolidated our team and our portfolio and we’re glad that we managed to establish a strong collaboration with our partners,” said Wolf. He added this year the company will launch new reactors and equipment that will allow for a completely automatic testing workflow in anatomic pathology labs and will also make possible standardized and faster diagnoses for several conditions, such as breast, gastric, lung and colorectal cancers, malignant melanoma and lymphomas. This Roche division has been active on the local market since May 2009. It currently has 75 employees across the country, 27 of whom were recruited last year.
Food Bioresources Institute. “We want to go back to using plants and to the way these products were prepared hundreds of years ago, where there were no artificial additives. Apart from this new line of products, we’ll also invest in these plants, in order to extend the lineup,” says Minea. For this year, the president estimates a 12 percent increase in business volume, from the EUR 65 million it reported for last year.
Angst beefs up network development and new products
Roche Romania bemoans late payments in medical system
The meat products market will not see any succulent hikes this year as more and more companies are selling their products on the black market, which currently makes up some 40 percent of total sales, says Sorin Minea, president of Swiss-Romanian company Angst. “The consumption of meat products has gone down by about 10 percent, because a large chunk of the total production ended up on the black market,” Minea bemoans. He adds that the price of meat has grown by about 19 percent compared to the same time last year, but the price of meat end products has stalled, because of customers’ low purchasing power. The company invested EUR 1.5 million in the first trimester of this year alone, in its Buftea and Sinaia production facilities and developing its 24-store chain. Angst recently launched a line of low salt and low fat products, with the help of the
The Romanian pharmaceutical market will be at a standstill this year, because of government measures for hospital decentralization and classification and the transfer of some drugs to closed-circuit drug stores, believes Dan Zamonea, Roche Romania’s GM. “The local pharmaceutical market will remain at 2010 levels, with the possibility of 5 percent growth,” said Zamonea. “The main causes are issues inside the system, late payments and financing difficulties.” Roche Romania’s sales for 2010 were RON 900 million, in producer prices. “The money is coming in very late. Right now we are getting the money for sales we made about a year ago, because we cash in 270-300 days’ time,” added Zamonea. Roche Romania sells its products through medicine distributors, rather than straight to drug stores, and most of its portfolio goes to national programs, said the GM. This year, the company expects moderate growth. ■
“During a crisis, customers become more sophisticated, careful about the products they use,” Daniel Bach, Holcim Romania GM
50 The Diplomat July 2011
driving
Riding the wind of change The new Ford Focus brings sophisticated technology to the compact car segment. The Diplomat – Bucharest finds if the new model lives up to its heritage as a driver’s car. By Adrian Ion
O
ne of the toughest classes in the Outside looks cars’ category competition is the “What sells cars today is the design,” says compact C segment or small family the Italian exterior designer of the Focus, as Brits call it. This fierce battle has some “so we invested a lot of time and effort to serious contenders such as the Volkswagen make this car look like energy in motion.” Golf, Opel Astra, Toyota Auris and Ford The European design arm of Ford was in Focus. This is one of the segments that charge of developing the model and drew bring the most revenues to car manufac- on the same theme of kinetic design, which turers so no effort is spared in trying to I must say looks extremely good and suits transform a new model into a cash cow. the sporty character of the car. The sleek The latest manufacturer to have design has some drawbacks, one of which launched its compact star is Ford with the is poor visibility, especially at the back. new Focus. I test drove the latest creation An inexperienced driver will find parking and the US manufacturer’s first global very difficult without the aid of parking model on the highways and twisting roads sensors or a rear view camera. of Austria and Slovakia. The new Focus is Inside the cabin a completely new car and exceeds its car class standards in many ways, thanks in Ford aims to link the interior of the Focus part to an array of gadgets and facilities to the spirit of its exterior so the curves of that you will not see in any competitor’s the outside continue along the dashboard and central console, creating a cocoon vehicle. like feeling for the driver and front passenger. The massive dashboard could be inconvenient for some larger drivers as it invades the space both from the front and the sides. The technology that Ford has incorporated into the new Focus is impressive. The most complex computerization system is called MyFord Touch, essentially an extension and update of the MyFord features for interior settings customization. MyFord Touch extends the customization of ambient lighting colors and brightness, to display functions and colors, the gauge cluster and infotainment system and offers the driver a pretty touch sensitive LCD screen interface from which to control, well,
almost everything. It also provides wireless internet to anyone in your Focus if you plug a 3G wireless transceiver into one of the two USB ports. MyFord Touch replaces the dashboard display with an eight-inch touchscreen. The ultimate goal of the system is to make driving safer by keeping the attention and eyes of the driver on the road. The voice recognition system is still subject to criticism as it will go wrong from time to time but I am sure that updates will make it more reliable and user friendly.
How it drives
The handling and pleasure of driving was always the strong point of the Focus. Since its first generation, it has constantly raised expectations of how a car in this category should drive. The new Focus platform is an improvement on the one that underpins the older model and extends the driving capabilities. At the rear, there’s an independent multilink suspension, while at the front, the ABS also serves as a limited-slip differential which makes the car very agile and invites the motorist to explore the limits of a sportier drive. My favorite is the petrol engine, in the 1.6 and 180 HP version fitted with the dual clutch six-speed automatic gear box called Power-Shift. This combination offers a spicy recipe of power and a sporty feel combined with a smooth ride ensured by the automatic transmission. Overall this car should be a winner and definitely brings a new flavor of excitement and novelty to the rather conservative compact car segment. ■ 51
business leader
Tapping into water investment A
pa Nova, the Romanian subsidiary of French company Veolia Eau, is one of the best known privatepublic partnerships signed in Romania since 2000. The company’s name has been highly publicized since it inked two leasing contracts on the local market, a 25-year one to manage the Bucharest water supply and another 11-year deal to run Ploiesti’s water system. Currently, the company is led by Bruno Roche, who lives in Ploiesti. What he says first about Romanians is that they are the top European tax payers, a positive aspect to be taken into account by a company, especially in these tumultuous times. “Romanians are the best contributors and taxpayers in most European countries,“ said Roche, who is also the president of the French Chamber of Commerce in Romania. Media reports over the past weeks paint a gloomy picture of foreign investment on the local market. However, Roche sees large investment opportunities in Romania, due to labor force availability and the real need for infrastructure in the major economic fields with a direct impact on
52 The Diplomat July 2011
the public. His opinions on what needs to be changed locally don’t differ from those of most of the expats traveling, living and working in Romania: better infrastructure, the restrictive laws against public-owned companies and their access to different projects and financing, plus the lack of a coherent fiscal system and legislation.
Turning off the tap
According to the Apa Nova man’s estimations, water consumption in Romania costs EUR 500 per year per family, “a reasonable
200
million RON is the sum Apa Nova will invest to expand the water supply network in Bucharest by 2016
With some RON 200 million of varnished investments and plans to expand in other cities in Romania, Apa Nova is looking for more local investment opportunities. Bruno Roche, the company’s GM and president of the French Chamber of Commerce, Industry and Agriculture in Romania (CCIFER), told The Diplomat – Bucharest Apa Nova’s latest plans for local lease contracts as well as his realistic take on the Romanian business environment. By Magda Purice
price to pay,” said Roche. The most payments in Romania come at the end of the year, which is, according to the manager, part of the local habit: to pay debts at the end of the year. Like any other manager coming from another country to Romania, Roche also observes the local customs and routines of Romanian consumers. According to him, many old habits have died in the last decade. According to Roche’s calculations, Romanians consumed an average of 400 liters of water per day in 2000. Currently, average water consumption in Romania is 150 liters of water per day. According to Roche, the difference is because local consumers have started to understand market economy rules and the subsequent costs.
Investors splash the cash
With its two lease contracts for the public water supply in Bucharest and Ploiesti, Apa Nova has a long-term investment plan for these cities, according to Bruno Roche. The current legislative initiative, especially the long-disputed regionalization issue, has slightly delayed the development plans of Apa Nova outside Bucharest and Ploiesti
business leader but, as Roche said, the lobbying of the local authorities is ongoing. By 2016, the Veolia Eau subsidiary will have invested a total of RON 200 million in Bucharest for two projects comprising the expansion of the water supply network and waste treatment station. According to the GM, the company will invest RON 33 million yearly as part of the “Bucur program”, a project required by Bucharest’s city hall. As part of the contract, the authorities will map the locations where expansion is needed and the French firm will perform the works. “The company is continuing its investment plans for the two cities but is also looking at possible openings in other Romanian towns,” said Roche.
Drip drip of water treatment in Bucharest
Another important joint project for Apa Nova and Bucharest city hall is the Glina wastewater treatment station, which should become functional in the second half of July. “We will treat Bucharest’s waste water and the bad situation of waste quality will improve, because, so far, this water has never been treated. The station will
start functioning in stages and the quality of the waters which spill into the Dambovita River will improve,” said Roche. The Glina project has been developed in two stages, with the first one to be completed this summer. The project has been financed partially through European money, both pre-aderation and cohesion funds. The total investments in the Glina station amount to approximately EUR 500 million. So far, the first stage of the project has cost EUR 82 million and is estimated to top EUR 100 million, while the second stage of the works will absorb some EUR 400-450 million. European funds contributed 54.6 percent of the first stage, a loan from the European Investment Bank brought almost 30 percent, while another loan from the European Bank for Reconstruction and Development (BERD) made up almost 12 percent with the state budget topping it up with 3.5 percent. When finished, the wastewater treatment station at Glina will treat the sewage water of Bucharest and the neighboring areas, and the station is expected to generate 400 to 500 tons of sludge per day,
which will be converted into biogas and, subsequently, energy production. The works for Glina station started before 1989. To date Bucharest has not had a wastewater treatment plant, a fact long underlined by the European authorities. The construction of the Glina station cost EUR 6.7 million, money invested by Bucharest’s city hall. ■
Who is Bruno Roche? With a background in engineering, Bruno Roche graduated from ClermontFerrand’s Superior National School of Chemistry in 1989. He has worked for Veolia Eau for two decades, managing different agencies of the company in France. Roche came in Romania in 2003 as manager of Apa Nova Ploiesti and, at the end of 2008, became general manager of Apa Nova Bucharest, both companies being subsidiaries of Veolia Eau, a division of the Veolia Environment group, which provides water supply and water treatment services.
IN THE NAME OF EXCELLENCE WE STAND UNITED Centrul Medical Unirea and Euroclinic become the largest private health care network
53
real estate GTC Romania signs partnership with Ana Group for office project in Bucharest
The Romanian subsidiary of real estate group Globe Trade Center, through its manager Shimon Galon, has signed a partnership with Ana Group, controlled by Romanian businessman George Copos, in order to start an office develop‑ ment in Bucharest, Ana Tower. The block will comprise 30,000 sqm of built area developed on a land plot of 3,500 sqm near Copos’s Crowne Plaza Hotel, and City Gate, developed by GTC. According to GTC, the partnership involves the two companies equally in the transaction. Ana Tower will have 24 levels and costs around EUR 70 million. Construction is set to start within six months.
EUR 50 million Oradea Shopping City to open this fall Commercial center Oradea Shopping City will launch this fall, following an invest‑ ment of EUR 50 million. According to data on the market, Shopping Center Holding is controlled by Cyprus-registered company Karias Trading Limited, run by Dumitru Ciocoiu. He is also involved in the admin‑ istration of companies controlled by Roma‑ nian businessman Puiu Popoviciu, known for the large North Bucharest project, Baneasa Shopping City. The commercial center in Oradea covers 30,000 sqm, com‑ prising 22,000 sqm of retail space, a 6,000sqm area for entertainment and 2,000-sqm
Basarab Bridge opened to traffic
America House renews contracts for over 30 percent of office area, finds new tenants
Investment fund AEW Europe, owner of the America House office building in Bucharest, has recently renewed lease agreements for over 30 percent of the office area, for periods of up to eight years. Tenants who have renewed their contracts include S&T, Tuca Zbarcea & Asociatii, Ericsson, Mastercard and Cisco. The office building has also found new tenants this year, such as two res‑ taurant brands Fitto Cafe and Be Nat, while Oliviers & Co Group has chosen America House in which to open its se‑ cond shop in Bucharest.
Bristol-Myers Squibb leases 930 sqm in Europe House, DTZ Echinox says
DTZ Echinox has recently assisted the American pharmaceutical company Bristol-Myers Squibb in leasing 930 sqm of office space on the fifth floor of Europe House to accommodate its Romanian headquarters. The company relocated its office to the Central Busi‑ ness District in May. The pharmaceuti‑ cal firm joins tenants such as Orange Romania, BCR-Banca pentru Locuinte, ALICO and White & Case. As of this year, Europe House belongs to CA Immo Group, after the acquisition of Europolis, successfully completed at the beginning of this year.
54 The Diplomat July 2011
food court. The mall will also offer parking for 1,000 cars. Bogdan Jigman, GM of the commercial center, said “The development, through its concept, is meant to address all the entertainment expectations of Oradea people.” In June 2010, Tiago Mall in Oradea was sold in a EUR 30.5 million deal to Shop‑ ping Center Holding, following an auction organized by insolvency company Casa de Insolvenţă Transilvania. At that time, insolvency was being sought by the Tiago Mall developer, MLS Proiect Oradea, a subsidiary of Irish developer Mivan. ■
The Basarab Bridge, which was started in 2006 to link west Bucharest with the city center, has finally been completed and is fully operational. The 2km long bridge, which has four road lanes and two tram lines, was built by a joint venture comprising the Italian con‑
struction company Astaldi and Spanish FCC Construccion at a cost of EUR 200 million. According to the city authorities, it has a 44m opening over Basarab railway station. The completed project was designed to cope with daily traffic of over 80,000 vehicles. ■
FMCG retail market in Romania falled back to level of 2005/ 2006 The FMCG retail market was estimated at EUR 16 bln in 2010, EUR 5 bln down from its 2008 peak, according to a Contrast Man‑ agement Consulting study. The consultants forecast recovery within four years. Over 2000-2010, Romania registered the highest growth pace in Eastern European countries, estimated at 123 percent, while countries such as Poland and Czech Republic saw growth of 54 percent. According to the study, traditional trade previously made up 70 percent of the Romanian retail market, while in 2010 it was split almost equally
between modern retail and kiosks trade. Romania’s modern retail market totals 729 stores like hypermarkets and supermar‑ kets, and could sustain 830,000 sqm more retail space. Bucharest remains the number one location for retail development, with potential for another 100,000 sqm. German retailers dominate the scene. Metro Group remains the leader of the FMCG market in Romania while Lidl&Schwarz entered the local market by opening 107 units at the beginning of this year, after rebranding the Plus Discount network in Romania. ■
real estate
Colloseum sees first tenants, Leroy Merlin, Carrefour and Altex
Adama completes two blocks from Evocasa Viva project in Brasov
Real estate firm Adama has completed the first development stage of its Brasovbased project Evocasa Viva, representing two ten-level blocks containing a total of 148 apartments, following an invest‑ ment of EUR 14 million, the company has announced. The envisaged project will comprise eight blocks and five residential buildings in total. Recently, Austrian Fund Immofinanz became the only shareholder in Adama Holding, after paying EUR 42.4 million for the remaining 69.22 percent of shares from funds and financial compa‑ nies such as Tiger Global, Morgan Stan‑ ley, Lehman Brothers and the real estate company’s founders.
Ploiesti West Park to accommodate green industrial building for SMEs Colloseum, the largest European mall to be developed in North-Western Bucharest by Nova Imobiliare, a company controlled by Greek businessman Panico Panayi, plans to complete its first development stage by fall of this year, following an investment of EUR 42 million. The stage comprises the opening of the retail park with French DIY unit Leroy Merlin, the construction of a Carrefour store of 8,000 sqm and a branch of household appliances retailer Altex. The 53,000-sqm retail park will be financed with a loan granted by Bank of Cyprus. “It took almost two years to get the con‑ struction permits for Colloseum. In 2014, I expect consumers in Romania to revive
their purchasing power from the years before the crisis,” said Panayi, president of Nova Imobiliare, who has businesses in Great Britain and Greece in bingo, leisure and vineyards. Totaling 190,000 sqm of area, Collo‑ seum will also include a mall of 480 shops and parking space for 10,000 units. The two-floor mall will cover 137,000 sqm and contain 12 cinema screens, a food court and entertainment area with a 20-lane bowling alley. Construction should start in spring 2012 and be completed in 2013. The total investment in Colloseum, comprising the retail park and the mall, will cost over EUR 350 million. ■
Real estate fund NEPI lists on the BSE Investment property market company New Europe Property Investments plc (NEPI) has been listed on the regulated market of the Bucharest Stock Exchange (BSE), the first real estate investment fund to do so. Before the listing, NEPI increased its share capital by EUR 29 million. A prospectus for admission to trading NEPI`s shares on the BSE was prepared by managers of Banca Comerciala Romana SA and SSIF Intercapital Invest SA. The prospectus was approved by the National Securities Com‑ mission (CNVM), the regulating authority of the capital markets in Romania. NEPI is
also listed on the AIM market of the Lon‑ don Stock Exchange and the main market of the Johannesburg Stock Exchange (JSE Limited). New Europe Property Investments plc, registered in the Isle of Man, was estab‑ lished to invest primarily in the high quality office, retail and industrial property market initially in Romania and thereafter in other Central and Eastern European countries. The group’s property portfolio includes 27 retail office and industrial developments in Romania estimated at EUR 297 mil‑ lion. ■
Ploiesti West Park, the 250-hectare busi‑ ness facility developed in Ploiesti by Alinso Group, has launched the first industrial building dedicated to SMEs. The new facil‑ ity accommodates almost 18,000 sqm. So far, the business park totals 50,000 func‑ tional logistic facilities and the firm plans to launch another 20,000 sqm of A-type spaces and a 9,000-sqm building for small enterprises. By the end of this year, over 100,000 sqm of buildings will have been completed. The EUR 750 million park accommodates companies such as Uni‑ lever, Lufkin Industries Inc, Toro, OTZ Logistics and British American Tobacco.
Soceram to put EUR 20 million into ACC plant in North-Eastern city
Romanian construction materials producer Soceram will start the construction of a plant to produce autoclaved aerated con‑ crete (ACC) in North-East Romania and has secured EUR 20 million for the project. According to Roxana Gheorghe, president of the board of directors at Soceram, the plant is expected to be finished in the sec‑ ond half of 2012 and become fully func‑ tional in 2013. Soceram runs four produc‑ tion plants for bricks and ACC in Romania, with two plants having halted production due to the lack of demand on the market. Soceram reported a turnover of EUR 21 million in 2010, down a quarter from the EUR 28 million registered in 2009.
55
events
AUTOMOTIVE EVENT: The Diplomat – Bucharest organized on June 29 a Power Breakfast on the Automotive industry, where decision-makers and top officials from the major car parts producers and other auto firms gathered to network, create business opportunities and learn about the country’s potential in the industry. The roundtable discussions included Paul Ichim, vice-president of EximBank; Constantin Stroe, president of ACAROM, the Association of Automotive Manufacturers of Romania and vice-president of Dacia; Mihai Ionescu, president of ANEIR, the Association of Exporters and Importers of Romania; Dudy Perry, CEO of New Kopel Group; Iulian Sorescu, associate partner of Noerr Finance and Tax; and other high-ranking representatives of the automotive industry and financial sectors, as well as ministry officials. GOOD SPORTS: The Ministry of Foreign Affairs (MAE) organized the ninth MAE Cup, which saw Romanian and foreign diplomats compete in football, basketball, badminton, tennis, and table tennis. More than 450 people participated in the event. The now traditional football match between the Journalists’ National and the Diplomat All Star team ended in a 5-3 victory for the journalists. The press side also won the basketball tournament, narrowly beating the diplomats’ mixed team, 31 to 28. But the All Stars got their revenge, beating the BCR basketball side by 28 to 22. HOMES AND HOPE: Thirty homes and a school were
rebuilt from scratch and another 50 houses renovated in Dorohoi, Botosani County, as a part of a campaign called “I am rebuilding hope too!”, launched by Habitat for Humanity Romania. The campaign took place over nine months, until June 2011. The association also provided help for 300 families from the area as part of the project. Some 500 volunteers were involved in the scheme, putting in a total of 3,245 hours of work.
HEALTHY BUSINESS: FamilyClinic, located in Northern Bucharest, was opened at the beginning of June, the culmination of a EUR 1 million investment. The two-store clinic, which covers over 650 sqm, provides more than 20 types of specialized medical services, has 11 employees and over 50 collaborating doctors. The clinic’s managers estimate the facility will treat 11,000 patients in its first year of activity and generate EUR 300,000 in income. 56 The Diplomat July 2011
events
VICTORIOUS RETURN: The tenth Transilvania International Film Festival (TIFF)
announced its winners on June 11, at the National Theatre in Cluj-Napoca. The jury awarded the EUR 15,000 prize to the Argentinean film No Return, directed by Miguel Cohan. TIFF was held this year between June 3 and 12, in Cluj-Napoca. Over 220 films from 45 countries were screened and special events were organized in over 30 venues in and around Cluj.
EMERGENCY AID: Raiffeisen Bank, in partnership with emergency medical service SMURD, launched a co-branded debit card. When customers make a purchase on the card, either in a store or online, 0.5 percent of the total sum paid will go into the Foundation for SMURD’s account each month, while 50 percent of the annual card administration fee will also be donated to the organization.
PRO BONO: The Regina Maria Foundation, established by Dr. Wargha Enayati and his wife Mitra Enayati, has opened a medical clinic in Bucharest that will provide free medical services to disadvantaged patients, including the homeless and people without health insurance. The clinic’s activity will be supported also by the Bucharest City Hall. The clinic was inaugurated on June 28 at an event also attended by Sorin Oprescu, Mayor of Bucharest.
REVVING UP: Audi launched the smallest member of its SUV family, the Q3 model, in a glamorous event intended to reflect the fashionable style of the car. The Q3 is aimed at drivers who appreciate the versatility of a luxury crossover, says Audi. The first deliveries to buyers are due in late August and prices start at around EUR 30,000. CLEAN SWEEP: Employees of
pharmaceutical company Merck Sharp & Dohme (MSD) Romania have cleared green spaces in four cities, to mark Environment Day. More than 80 employees picked up over 40 bags’ worth of trash and weeds in the Bucharest Botanical Garden, on the Rosetti leisure area in Iasi, and in Cluj-Napoca they cleaned the Faget green zone. A fourth team in Timisoara chose to clean up the Republic Boulevard. In total, the four teams collected more than 100 kilograms of household waste.
57
city life
We’re half-way there: Bon Jovi’s first local concert nears Legendary American rock band Bon Jovi are due to touch down in Romania for the first time on July 10, and perform in Piata Constitutiei (Constitutiei Square), in front of the Parliament building. The event is being organized by East European Entertainment and Marcel Avram, in partnership with D&D East
Deftones to rock Alternative Summer Day
American hardcore rock act Deftones will perform at the first Alternative Summer Day at Bucharest’s Arenele Romane on August 13. They join a lineup that features the Romanian bands Parazitii, Luna Amara, While Walls and Implant Pentru Refuz. The event is being produced by Alternative Music Experience, a joint venture between Bring The Noise and King Size Production companies. Tickets can be purchased through the Eventim network, in retail shops Germanos, Orange, Vodafone, Domo, Humanitas and Carturesti bookstores, MyTicket and Biletoo (Flanco, Palatul Copiilor, Unirea Shopping Center, Unirii metro station) as well as from the websites of the three tickets sellers. Prices start at EUR 22 until July 31, EUR 26 until August 12 and EUR 31 on the concert day. ■ 58 The Diplomat July 2011
Entertainment. Tickets are on sale in Germanos, Orange, Vodafone, Domo, Humanitas and Carturesti stores, and from www.eventim.ro. The group will perform without guitarist Richie Sambora who is in rehab. The concert is part of the band’s Circle Tour, which features 135 concerts in 30
countries. The New Jersey band kicked it off in the USA in February this year and reached Europe in June, starting with a Zagreb gig. Tickets to the Bucharest leg cost EUR 115 for the VIP area, EUR 89 for the tribune, EUR 71 for the Golden Circle area and start from EUR 38 for the lawn area. ■
Narcotango shimmies back to Bucharest on July 12 After the success of their 2010 appearance, Narcotango, the Argentinean tango band, are returning to Romania, with a show on July 12 in Bucharest’s Herastrau Park, at the Summer Theatre (Teatrul de Vara). It will include dancing, visuals and different guests to entertain the audience, and will start at 8 pm. Narcotango have been nominated at the Grammy Latin Awards for best tango album. The band then started an international tour taking in the main cities of the United States, Argentina and Europe. Tickets for the local show are on sale in Diverta, the Muzica shop, Flanco, Unirea Shopping City and online, for around EUR 24, at bilete.ro, blt.ro, biletoo.ro and myticket.ro. ■
Omara Portuondo and Buena Vista Social Club Orchestra to bring Cuban sounds to Bucharest Herastrau Park’s Teatrul de Vara (Summer Theatre) will echo to the Cuban strains of Omara Portuondo and the Buena Vista Social Club Orchestra on July 30, from 7 pm. Besides the 14 Cuban musicians joining Portuondo, the event will fea-
ture performances by the Havana Latin Band, Brazilian Girls, DJ Bidi, Tropical Dance Crew and MC Wilmark. The Summer Theatre in Herastrau Park has a seated capacity of 2,500. Ticket pri‑ ces start at EUR 17 and reach EUR 34 for the VIP area. ■
business events The Diplomat Events provide international and local corporations, business executives and authorities with an excellent platform to meet and discuss industry trends, create business opportunities at the highest level with Romania’s top decision makers.
The forums, conferences and business breakfasts are “must attend� events for any businessman interested in upto-date information on the latest developments and changes in politics and economics.
The Diplomat Events have positioned themselves over the last seven years as being perfect places for high level networking and creating personal business relationships.
Romanian Forum
Power Breakfast
Conventional Energy Forum
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