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Vol. 7, No. 8, October 2011

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The logic of logistics Sector gets price conscious

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Vol.7, no. 8, October 2011

President Traian Basescu met his American counterpart Barack Obama in Washington on a working visit by the Romanian head of state. The leaders signed a document with significant bearing on Romaniaâ&#x20AC;&#x2122;s national security and adopted a declaration about the twenty-first century strategic partnership between the United States of America and Romania.

Raw deal Why mergers and acquisitions are currently thin on the ground

Office space After a few years of market stagnation, is revival on its way?

Teutonic toil Top German firms analyze the market and outline their plans

6. New weapon

16. Defensive strategy

Romania plays an ace in its quest for EU funds

Lockheed Martin talks plans on the local market

8. power players

54. Quite content

President Basescu calls for investment experts in Romania

The 3D market is shifting the focus from display to content

12. end of the line

56. Homing in

Nokia announces it is closing its Cluj facility

Immorent head Bogdan Cernescu reveals the companyâ&#x20AC;&#x2122;s prospects

13. BREEZING IN

58. Mall mania

Wind potential blows Nordex onto the Romanian scene

Developers announce seven new mall projects for this year

editorial

306 Calea Mosilor, 56 Bl., A Staircase, 2nd Floor, Apt. 7, 2nd District Bucharest, Romania www.thediplomat.ro Publishers Adrian Ion adrian.ion@thediplomat.ro

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Editor-in-chief Dana Verdes dana.verdes@thediplomat.ro

Reporters Roxana Cristea roxana.cristea@thediplomat.ro

Magda Purice magda.purice@thediplomat.ro

Copy-editor Debbie Stowe Business Development Director Magda Ion magda.ion@thediplomat.ro

Advertising Sales Executive Nicolae Popoviciu nicolae.popoviciu@thediplomat.ro

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The Diplomat October 2011

Are we the authors of our own misfortune?

ne of the hot topics of the last month has been the TV show featuring a group of French comedians, broadcast by a major TV station in the Hexagon, mocking Romanians whom it describes as dirty beggars. As Romanians, we are upset, of course, but the real question is why we are the subject of such programs? Is it better in such cases to put our heads down – as the Romanian foreign minister suggests – and not dignify such public slurs with a response? In another slight on the country, we also saw the case of some young people who, besides the “misfortune” of being Romanians in France, had the incredible bad luck to own smart phones similar to one that had just been stolen from someone in the area. Our compatriots tried to demonstrate – in the easiest way possible – that the phones were theirs by showing the personal data on their gadgets. But it seems that they were too smart for the French policemen on the case who did not accept the common-sense proof of innocence. And one policeman gave his reasoning: “Shut your mouth! I can’t stand Romanians!” Perhaps we shouldn’t blame him, as he was just speaking his mind. But why should he feel that way? There are more examples. Another unfortunate incident involved a young Romanian, who, despite being innocent of any crime, spent several months in a French prison. The French authorities had not done their job and threw him in jail because he was Romanian. Nor was he helped by his compatriots: it’s common knowledge that we Romanians are our own worst critics and lack solidarity. It is clear that many foreigners do not like us – and curiously, especially Latinos, people who think and behave like us. So who is to blame for the way foreigners feel about us – them or us? The truth is probably somewhere in the middle. It may be a coincidence, but Romanians

do the most damage to their country’s image where the local authorities aren’t doing their job with much aplomb. How come in Austria or Germany one seldom hears of such issues involving Romanians? But it is not entirely the xenophobes’ fault. If we had maintained certain cultural standards as a nation, perhaps we would not have so many “incidents” abroad. Unfortunately, in recent years our foreign affairs presence has been insignificant. In Europe, one must stand out to count. And with what have we stood out as a country? With 0.5 percent economic growth? How we accepted US missile defenses in our country when the Poles didn’t want them? When we said ‘yes’ to the positioning of the US defense shield in our country when the Czechs didn’t want it? The impression is that instead of distinguishing ourselves among European countries by uprightness, morals and image, we stand out for negative things. As to our foreign minister’s statement that we should ignore the French comics, I’d say yes, he is right, but he has to admit that such attacks are a direct consequence of the insipid image our country has in Europe. Why do French journalists not fill their papers and websites with reports on the horrors the Hungarians, Czechs or Poles are committing abroad? Maybe because the Poles are among the only ones to have avoided the effects of the crisis in Europe, or because the Hungarians have perfectly integrated with European civilization or because the Czechs have found the winning formula to profit by highlighting their history. But we have done something. We have a country brand! A leaf. It is true that it’s normal to have such a brand, but our frail little leaf in the wind is nowhere near enough...■

politics Basescu removes Lazaroiu, names Sulfina Barbu as head of Ministry of Labor

President Traian Basescu has signed a decree removing Sebastian Lazaroiu as Minister of Labor and appointing Sulfina Barbu to the position. The move for dismissal came after Lazaroiu said in an interview that he would formalize his entry into politics “not in the PDL as it is now”. Both politicians are members of the Democrat Liberal Party. In other developments, Peter Eckstein Kovacs resigned recently as presidential adviser to Basescu, over differences of opinion on the Rosia Montana project, which the adviser opposes.

Local and parliamentary elections to be held simultaneously

Romania’s governing parties have agreed to merge local and parliamentary elections. This move means delaying local elections until the autumn of 2012. However, officials from the parties have not settled upon the voting system that would be used. Liberal Democratic Party (PDL) representatives said they wanted parliamentary and local elections to take place simultaneously on November 18, 2012. The proposal concerning the voting system will be discussed by the coalition, according to comments made at a PDL parliamentary meeting.

Constitutional revision procedure stumbles in Senate

Senators have still not reached an agreement on the legislative procedure to be followed for the review of the Constitution. PDL-UDMR-UNPR officials proposed that the revision procedure for the Constitution not be conducted separately in the two chambers of Parliament. However, the opposition says that it believes that the text should be analyzed separately, and that any article on which agreement cannot be reached be mediated by a special commission. Because of this difference of views between government and opposition, the permanent bureau of the Senate has decided to seek a decision from Parliament’s legal commission.

The Diplomat October 2011

Romania inks anti-missile shield agreement Romanian Foreign Affairs Minister Teodor Baconschi and the US State Secretary Hillary Clinton recently signed an agreement on the deployment of the US Ballistic Missile Defense System in Romania. “The announcement we have made is a very important milestone for our two countries and for NATO. It provides Romania with a leading role in NATO’s new missile defense capabilities. This cooperation demonstrates how our two governments are working together to make NATO’s landmark Lisbon decision on missile defense a reality,”

announced the US State Department. The legally-binding agreement will allow for the establishment and operation of a US land-based SM-3 ballistic missile defense system in Romania, but needs to be voted on by the Romanian Parliament. The signed agreement followed President Traian Basescu’s official visit to the US, where he met President Barack Obama. On his return, Basescu said that the anti-missile agreement with the US in Washington brings Romania’s security to the highest level in the country’s history. ■

Leonard Orban to lead new ministry in charge of EU absorption funds The presidential adviser on European Affairs, Leonard Orban, will lead a new ministry intended to hike the absorption of European funds, following the endorsement of the ruling coalition. In his new role as minister of European Affairs, Orban will also take over the headship of the Department for European Affairs and the Authority for the Coordination of Structural Instruments, and will coordinate the overall process of EU funds absorption. Orban will also represent the Government in its relations with European institutions in Brussels. The formation of the new ministry comes after President Basescu spoke in July about setting up a new ministry to manage European funds. Orban has focused on European matters in the last years, as deputy chief negotiator with the European Union between 2001 and 2004 and chief negotiator between December 2004 and April 2005. He was also

Romania’s first European Commissioner, in charge of the Multilingualism portfolio from January 2007 to February 2010. ■

politics King Mihai I to address Parliament in October

After more than 60 years, King Mihai I (pictured) will address the nation from the rostrum of Parliament. The king’s speech comes “at a time that requires trust, unity, hope and respect in society”, according to officials from the Royal House. The Liberals’ proposal to invite King Mihai I to speak at a solemn session of Parliament on October 25 was accepted by the Romanian Parliament. The decision passed with 203 votes in favor, three votes against and 46 abstentions.

Basescu: WB should have warned Romania off Bechtel deal

In response to a question related to Bechtel, President Basescu told a meeting with Romanian community officials in Washington that the World Bank (WB) should have advised Romania not to sign the contract, but “the bank was silent and now comes to give us some lessons”. The Minister of Transport announced recently that Bechtel would finish construction of the two sections of the highway at a cost of EUR 6.9 million per kilometer, 50 percent of the total cost per kilometer. So far, only 52 km of the highway has been built.

Romania’s Schengen accession delayed indefinitely The decision regarding Romania and Bulgaria’s accession to the Schengen area has been put back to an unspecified date, after Poland, which currently holds the EU presidency, did not submit the move for a voting session by the Directorate-General for Justice and Home Affairs of the European Union, because of opposition from the Netherlands and Finland last month. Locally, the decision met a mixed response. The Romanian-Dutch Chamber of Commerce voiced its support for Romania’s accession to the Schengen zone. Ben Jager, executive president of the Dutch Romanian Network and Honorary Consul General of Romania, said, “We would like to ask all involved members of the government(s) to break the deadlock in the negotiations. We propose a more pragmatic path. In this matter we would like to draw attention to the compromise of Germany and France, which proposed a two-step scenario.”

Adding his view, Peter de Ruiter, head of the Romanian-Dutch Chamber of Commerce, said “Romania’s Schengen accession would be beneficial for the free movement of both people and goods. It will help intra-community trade and could stimulate Romania’s attractiveness to foreign direct investment in sectors such as manufacturing, assemblage, transport and logistics. The Netherlands already is the largest foreign investor in Romania and we believe Romania’s accession to Schengen would also be in the interest of the Dutch business community, leading to stronger commercial exchange between the two countries.” Meanwhile, Romania’s Minister of Foreign Affairs, Teodor Baconschi said that the current delay in a decision regarding Romania’s accession was better than a no vote, “leaving the discussion open for this month’s session of the EU’s DirectorateGeneral.” ■

Traian Basescu: ‘20-30 professionals needed to lead investment decisions’

Macovei calls for anti-corruption regulations in EU

Monica Macovei says unitary anticorruption regulations which should be respected by each member state are needed in the European Union. According to the politician, every EU country should be aware that approximately EUR 120 billion is lost annually due to corruption. Last year, Macovei led the composition of a written statement, which was adopted by the European Parliament and which asked the Council and the Commission to create a strong mechanism to monitor corruption in the bloc.

The Diplomat October 2011

too many people when it comes to an inPresident Traian Basescu has called for the creation of a group of 20 to 30 profes- vestment decision in Romania. Everyone sionals to make investment decisions for fears the DNA and the further implicaRomania. According to the president, in- tions of the act of signing approval for an investment,” said Basescu. According to vestments currently have to be approved by too many decision makers, some of whom the president, the delay in making and won’t sign off on certain deals out of fear approving investments involves too many of the National Anticorruption Director- ministers and agencies and, in the process, ate (DNA). “at least two or three decision makers will “There is too much involvement from say no.” ■

economics Omniasig merges with BCR Asigurari

Insurer Omniasig has merged with BCR Asigurari. The new company will keep the name Omniasig, after the majority shareholder decided that that brand had the greater awareness of the two companies. Last year, the firms had a combined turnover of EUR 340 million and a market share of 21 percent, which means that the new company will become the biggest insurer on the local market.

Metrorex inks EUR 10.2 million contract for construction consulting services

Erste Group reaches understanding with SIFs

Erste Group has signed an agreement with four of the five SIFs – Banat Crisana, Transilvania, Muntenia and Oltenia – for a takeover package of EUR 2.16 billion of BCR shares, representing 24.12 percent of capital, through several operations involving payment in cash and exchange for titles issued by Erste Bank. The agreement requires that the participating SIFs waive their right to apply for the listing of BCR and to receive special dividends.

Romania labor costs second fastest rising in EU

Romania has been ranked second in the European Union by annual growth of labor costs for one hour of work. Hourly pay rose 7.2 percent in the second quarter, compared to the European average of 3.4 percent, according to Eurostat. The expenses include salaries and non-wage costs. The largest increase in the EU came in Bulgaria, while Slovakia was in third place. Annual declines were recorded in Greece, Ireland and Portugal.

10 The Diplomat October 2011

Metrorex has signed a RON 44.71 million (EUR 10.2 million) contract, VAT excluded, with a consortium formed of the Romanian company Metroul and French firm Systra for construction consulting services for the Universitate-Piata Iancului subway section. Half of the ten-year deal will involve the provision of services and the supervision of execution works, while for the remaining 60 months the activity will switch to monitoring services. Financing will be provided by Metrorex. The Universitate-Piata Iancului section is the

second part of Section V, which runs from Drumul Taberei to the Pantelimon neighborhood. The 8km line includes 12 stations. The auction for the actual construction is scheduled to take place between October 2011 and March 2012 and the preparatory works for the execution will begin in the first half of next year. The same consortium is providing technical assistance for the first part of Section V, the Drumul Taberei–Universitate segment, based on a RON 36.68 million (EUR 8.5 million) contract, VAT excluded. ■

Hidroelectrica, Oltchim, SNLO, Electrica Furnizare and Romarm to get private management Hidroelectrica, Oltchim, Societatea Nationala a Lignitului Oltenia (SNLO), Electrica Furnizare and Romarm will be the first companies from the Ministry of the Economy portfolio to get private management. Private managers appointed to state companies will be paid up to EUR 75,000 monthly, plus a hefty annual bonus if

their companies turn a high profit and the performance criteria of their contract are met. Government sources said that Hidroelectrica Oltchim, Tarom and CFR Marfa are the state companies where both the IMF and the Romanian authorities have so far agreed to appoint private management, with the final list to be completed in September. ■

economics State to support over-55s who rent out their farm land

The Romanian state will pay between EUR 30 and 100 per hectare annually to farm owners aged over 55 who want to rent out their agricultural land for five to 15 years. In the event of a sale, the state will pay EUR 200 per hectare, under a new draft law. Eligible individuals must contribute to the pension system and meet their other social insurance obligations, and land should not be part of merged holdings by lease or subject to other legal contracts.

CFR Marfa losses to double this year

CFR Marfa’s losses will more than double this year, from RON 81.2 million to RON 192 million. The main reason for the rise is that the Government has not made a capital increase that would have stemmed the losses and arrears. “The higher losses in 2011 come from the incurring of penalties over general government budget debt to the state totaling RON 150 million,” announced the Ministry of Transport. In addition, the Ministry of Transport said it intended to adjust CFR’s budget for the current year so the company’s losses were less than half the initial estimate, RON 350 million from RON 748.39 million, according to a draft document by the institution. CFR ended last year with losses of RON 1.04 billion, up 12.5 percent compared to 2009.

Four dairy producers investigated by Competition Council over rigged bid

The Competition Council (CC) is investigating possible collusion between four dairy companies to participate in a rigged auction organized by Giurgiu County Council for a contract to supply dairy products to students and preschool children. The CC has carried out surprise inspections at the headquarters of all four companies, namely Dorna Suceava, Alba Albalact, Lactate Giurgiu and Simultan Faget Timis. The total value of contracts involving the four firms over 2010-2014 is EUR 4.2 million. If the Competition Council finds that the rules have been violated, the companies risk fines of up to 10 percent

12 The Diplomat October 2011

Nokia to close Jucu plant with loss of 2,200 jobs Mobile phone producer Nokia has announced that it is planing to close its factory in Jucu, Cluj County, this year, with the loss of 2,200 jobs. The Finnish telecom giant said in a statement that its intention was to “focus its feature phone manufacturing on those locations with optimal proximity to suppliers and key markets. As a result, Nokia plans to close its manufacturing facility in Cluj, Romania by the end of 2011, as Nokia’s high-volume Asian factories provide greater scale and proximity benefits.” In a letter addressed to the 2,200 employees at Jucu, the company explained the decision: “We are aligning our manufacturing in Europe with consumer behavior in Europe. Specifically, smartphones sales in Europe have increased while feature phones sales in Europe have decreased, and the majority of our work in Cluj has been around feature phones manufacturing. This is

painful but necessary, and we recognize this has a significant impact on our employees, their families and the local community. We will do our best to support our colleagues.” Nokia opened the production facility at Jucu in September 2008, following an investment of EUR 60 million. Production was moved to Cluj from a plant located in Bochum, Germany. Nokia Romania announced a turnover of EUR 43 million in 2010, a 14 percent hike over 2009. In April of this year, Nokia shut down its R&D center in Cluj, laying off 120 employees. In spring, the mobile phone giant changed its management, naming the former Microsoft president Stephen Elop as CEO of the telecom company. He announced at that time that Nokia was facing a large drop in its market share, from 50 percent worldwide four years ago to 25 percent in 2011. ■

Bucharest-Ploiesti highway to be ready in December The Bucharest-Ploiesti highway works are likely to be ready in December, the Romanian authorities have announced. At the site, both workers and machines have doubled in number, while officials have found the money to expropriate the remaining land plots in Pipera. Owners will receive up to EUR 20 per sqm. Currently, half of the total highway works are finished. Works from Colentina to the ring road were not started because the state had no money for the expropriations. Between 2009 and 2010, the Ministry of Transportation completed road infrastructure projects totaling EUR 3.5 billion, with money coming from the state budget, but the number of new kilometers of highway in the same period was only 52 (from the Campia Turzii-Turda-Gilau section). However, the institution promises a few

hundred kilometers of highway will be completed in the coming years after work began on more than 200 km the second half of the 2010. Last month, the Highway and National Roads company signed a contract with Italian-German consortium Astaldi-Max Boegl worth RON 498.8 million, excluding VAT, for the design and construction of the CernavodaMedgidia section of highway. The road is scheduled to open to traffic in 2012. The design will take three months and the construction another twelve months. The warranty works period has been set for 48 months, according to the company. The contract value is RON 726.2 million, less than the estimated figure. The 20.5km highway section construction is being financed by EIB funds and Cohesion Funds.■

energy Hidroelectrica takes out EUR 32 million loan for one year The largest Romanian energy producer, Hidroelectrica, has secured a EUR 32 million loan from RBS Romania. The money will be used to expand the company’s working capital and will have to be paid back in a maximum of one year. The loan comes in a context in which Hidroelectrica inked a EUR 110 million financing deal with the European Bank for Reconstruction and Development (EBRD). The funds will be used to modernize the 50-year-old Stejarul Bicaz power plant, one of the largest hydro units in Romania. The facelift is meant to prolong the power plant’s exploitation period by 30 years. According to Ministry of the Economy data, from early 2009 until the middle of this year Hidroelectrica was the company that allocated the highest sum to investments, at RON 2.6 billion. The firm’s investment

budget puts it among the three biggest spending companies in terms of investments to be completed by the end of this year, during which period it will carry out projects worth RON 2 billion (EUR 476 million), according to the Ministry of the Economy, the majority shareholder in the electricity producer. ■

Nordex to follow Vestas in establishing local office German wind turbines producer Nordex, which reported EUR 1 billion of revenues last year, says that it will open a subsidiary in Romania in the coming months. The company has already won two tenders to provide wind turbine equipment for investments in the country. “Nordex has confidence in the potential of wind energy in Eastern Europe. As proof of this, businesses in Romania are moving: this year the company received the first two

orders for a total of 20 MW. Our objective is to reach a significant market share. As we are convinced of better prospects for the renewable energy market in Romania, we intend to open a branch in the coming months,” company officials said. This is the second such announcement made in 2011 by a wind farm equipment producer. Earlier this year, Vestas, the largest producer of wind turbines worldwide, opened an office in Bucharest. ■

EnergoNuclear seeks new investors to forestall project review The Romanian state must find yet another investor for the construction of reactors 3 and 4 at Cernavoda, and, should none be forthcoming, the project must be reviewed, said Luca D’Agnese, CEO of Enel Romania, the company currently involved in the project for the expansion of the nuclear plant, along with ArcelorMittal and Nuclearelectrica. “The three of us alone cannot build these reactors. Enel has the option to double its stake and so does ArcelorMittal. If the state reaches 40 percent it will be necessary to attract a different investor. If such an investor cannot be found, the project for the con-

struction of units 3 and 4 should be revised,” commented D’Agnese. The Enel chief’s statement comes in the context in which the Ministry of the Economy recently announced that a South Korean company, BKB, leader of Korea Nuclear Consortium, had sent a letter of intention to the institution making known its willingness to buy shares in the project company. Currently, state-owned company Nuclearelectrica controls an 85 percent stake in EnergoNuclear, with the remaining shares being split between Enel (Italy) and ArcelorMittal Romania. ■

Exxon Romania to buy exploration services for Black Sea perimeters

Exxon Mobile Exploration and Production Romania will order petroleum exploration services for the perimeters operated with OMV Petrom in the Black Sea, an investment of between USD 400,000 and 1.2 million. The firm will select the provider in an auction scheduled for October 12. The contract will run for a period of one year. In 2008 OMV Petrom and Exxon decided to jointly explore the potential for deep hydrocarbon potential in the Black Sea. The period during which OMV Petrom aims to explore this area was extended by the Government in July for an additional five year. The total project costs are estimated at between USD 3 and 10 billion. The first exploration wells could be drilled later this year or early 2012.

Serbian oil company NIS plans to expand to Romania

The Serbian oil company controlled by the Russian giant Gazprom, NIS, plans to expand to Romania, Bulgaria, Hungary and Bosnia, and has registered subsidiaries in these countries. The company said it wants to triple oil production and to double sales by 2020 to become the market’s regional leader. “Registering subsidiaries in Romania, Bulgaria, Hungary and Bosnia is a step towards realizing the business development strategy of NIS in the Balkan region and the first phase of active entry in these markets,” said company officials. In related developments, NIS and East West Petroleum Corporation, based in Canada, signed in May this year an agreement to develop four oil and gas exploration blocks in Romania.

Turceni completes EUR 220 mln environmental investment

Turceni, the largest local thermo power plant, has completed a EUR 220 million investment in a desulphurization installation, company officials have announced. The new equipment is intended to fulfill the environment norms imposed by the EU. This is the largest investment of its kind made in Romania. The funds came from a loan approved by the Bank of Japan for International Cooperation and the works were carried out by Austrian firm Austrian Energy & Environment.

appointments R azvan Popa has

Violeta Luca has be-

Mihai Mares has re-

Daniela Cretu becomes founding partner for Romania of the John Maxwell Team, which specializes in coaching, training and business consulting. Cretu has served as a top executive with expertise in the banking and insurance sector and she is currently a consultant involved in leadership coaching. Her services portfolio also includes business consultancy, leadership and corporate development for large companies.

been appointed partner and head of the corporate, M&A and real estate practices in Romania at Kinstellar. Popa joined the independent law firm in 2009 as counsel and head of the local corporate/M&A and real estate practices. He has extensive experience in advising leading international and local companies in relation to a wide spectrum of investment projects in Romania. sumed the position of managing partner at Mares & Associates. He announced that the law firm had started independent operations, capitalizing on its extended expertise gained since 2006. The team comprises 10 lawyers, 5 partners and 5 collaborators, with a wide range of expertise including: commercial and corporate law, M&A, financing, energy and infrastructure, and real estate.

come Flanco marketing director, completing the senior management team. Luca will be in charge of the coordination of the marketing strategy for some 75 Flanco retail units, which have over 600 employees and a turnover of over EUR 100 million. She is experienced in the household appliance industry, having spent eight years as commercial director at Whirlpool Romania.

R adu L ucianu has

teamed up with Capital Partners to form a new company, Capital Property Advisors. He left CBRE in April this year. The newly formed and already active Capital Property Advisors will target sectors such as the investment markets, land, valuation, research and office leasing with a team of nine specialists, of whom eight come from CBRE. Capital Property Advisors has several transactions ongoing and expects to see the completion of two transactions by yearend which could bring the company nearly EUR 50 million.

Alina Stancu-Birsan, Monica Iancu, Oana Albota and Catalin Alexandru have been

appointed new partners at PeliFilip. The law firm has also promoted Irina Bugnar, Monica Statescu and Alexandra Radulescu to senior lawyers. Currently, it has a team of 45 lawyers, including nine partners and four senior lawyers. The firm was established three years ago in Romania, with five founding partners.

IN THE NAME OF EXCELLENCE WE STAND UNITED Centrul Medical Unirea and Euroclinic become the largest private health care network

14 The Diplomat October 2011

investments GERMANY

Vivani Salubritate to complete EUR 1 million investment

Vivani Salubritate, part of the German group Chinox Beteililgungs, will this year complete a EUR 1 million investment in an installation for the preparation, dosage and delivery of liquid alternative fuels in partnership with Heidelberg/ Carpatcement in Uzina Bicaz. Company officials also announced that a EUR 5 million investment – from the same partnership – in solid alternative fuel will be started this year. The financing will be provided by the company.

ROMANIA

Medas to open EUR 4 million hospital

Medical service operator Medas will open a hospital later this year following an investment of about EUR 4 million. According to the company, the facility will have 40 beds for continued hospitalization and between 50 and 100 employees. Medas Medical Center 2003 reported a turnover of RON 23.6 million for last year. The private healthcare provider is controlled by Simona Ateia and Abd Halal Ateia.

Felix Tourism invests EUR 20 mln in first five-star spa hotel

Felix Tourism is investing EUR 20 million in the first five-star spa hotel in Romania, which will be inaugurated at the end of next year, in Baile Felix. The company also owns the four-star International hotel, two three-star properties, Nufarul and Thermal, and four hotels classified at two stars, Mures, Somes, Union and Poienita, in the same town. With 2,080 beds, Tourism Felix played host to 43,300 tourists last year, of whom 4,500 were foreigners, mainly from Germany, Israel, the Netherlands, Sweden and Austria.

Muntmark to develop EUR 240 million wind farm

Wind project developer Emanuel Muntmark, owner of Monsson Group will start construction of a 150 MW wind farm to the north of Constanta. The investment will amount to EUR 240 million and the turbine supplier will be the Danish company Vestas. Muntmark is behind the development of several broad-scale wind farms on the local market.

MedLife opens hospital and acquires maternity clinic in Brasov

MedLife has invested over EUR 10 million in opening a private hospital with 60 beds and the acquisition of maternity clinic Eva in Brasov, which, according to the company, is the largest maternity facility in the region. The hospital, also in Brasov, covers an area of 5,500 sqm and has about 140 employees. Investment in the medical equipment reached EUR 2 million. The hospital is the fourth in the company’s network after two in Bucharest (Life Memorial Hospital and Hospital of Pediatrics) and one in Arad (Genesys).

Cluj Country Council pours EUR 5.6 mln into waste management solutions

Cluj Country Council has sent documents awarding the project concerning works for the construction of three waste transfer stations in Cluj Country, worth about EUR 5.6 million, for publication to the SEAP (Electronic Procurement System). The project includes the construction of three waste transfer stations in rural areas, Gherla Huedin and Mihai Viteazu. The investment is part of the integrated solid waste management in the county of Cluj.

interview

Defensive maneuver Twenty-four used F16 jet fighters are Romania’s best option, Scott Harris, Lockheed Martin president for Continental Europe, reveals to The Diplomat-Bucharest on the country’s potential aircraft purchase. By Adrian Ion What would the new F35 model cost?

We do not know that yet, as the F35 is not yet in production, but we expect it to be priced at a similar level to what a new F16 costs today. It is designed to be affordable. A new F16 in fly away cost is in the mid USD 40 millions.

With which other countries in the region is Lockheed Martin in negotiations for the acquisition of F16 fighter jets?

Following President Basescu’s recent visit to the United States, where the issue of the acquisition of F16 fighter jets came under discussion, at what stage are the negotiations from Lockheed Martin’s point of view?

I can tell you broadly what we believe is the status. Preliminary discussions about the actual potential talks regarding the acquisition of the F16 aircraft are taking place between the Romanian and the US Governments. We, LM, are not in those meetings – we provide information and support, but we are not part of those negotiations. We know that the Romanian Government is looking at its options. One is to acquire new F16 aircraft and the other is to acquire used F16 aircraft. Those are the two possibilities that are being discussed with the US Government.

Is Romania looking to buy 24 new F16 planes, rather than used ones as planned before?

Romania is in discussions over the F16 model; for the transition from what the Romanian Air Force has today, this is the next logical step. In the future, the new F35 aircraft will be available to NATO countries as well, but this is too big a leap for Romania. This is a very good solution for many years. Together with Greece and Poland, Romania would be flying the latest generation of the F16 model, much more modern even than the one that the US Air Force is flying. 16 The Diplomat October 2011

We have the F16 in 10 NATO countries. Many of these countries are also in the partnership for the new F35 model that will be manufactured in Turkey and Italy. Bulgaria, Croatia and Romania are the three countries in SE Europe that are looking at the option to acquire the F16 model. If all three countries make the same decision, a package deal can be struck, making the price and training costs more economical. I believe that Croatia and Bulgaria are only considering used F16 models.

What is the stage of discussions with Croatia and Bulgaria? Less or more advanced than Romania?

I would say less advanced. I know that there have been high-level meetings, and there is a great deal of interest. The negotiations are very active.

Is the F16 a cheaper or more expensive solution than Saab’s Gripen?

I do not know the price of a Gripen, but I am absolutely convinced that over the long term the F16 will be a cheaper solution, due to its interoperability costs, training and support from the US Air Force as well as the world infrastructure support. If you consider the recent Libya experience, NATO air forces flying F16s were able to work together and function almost as one air force, as they had NATO practice. We think that for Romania flying F16s with the other NATO allies is the right solution.

When do you expect a decision from the Romanian Government? Is there a deadline?

There is no deadline; the practical issue is how it will be funded. Will it be through some combination of financing, of payments – this can be worked out between the two governments. From our point of view, if someone comes to us saying that they want 24 aircraft, we would be delivering them three years from now.

On what other projects is LM working in Romania?

The one that we are very proud of is the new TPS 79 gap filler radar. It’s a new product developed for Romania and then we hope for the world market. Lockheed Martin has begun a co-production program with the Romanian industry to manufacture low- and medium-altitude gap filler radars. We are doing this project in Romania with UTI. We hope it will be a good product that we can take to other markets. The other project that we are part of indirectly is the US missile defense system that will be placed in Romania, the Aegis Ashore being a Lockheed Martin product. That system normally is on ships and we would love to be able to provide some variations of the Aegis combat system for the Romanian navy at some point if Romania modernizes its existing frigates or buys or builds a new ship. We are definitely in discussions on that. ■ The new TPS 79 gap filler radar

Following our previous announcement in The DIPLOMATâ&#x20AC;&#x2122;s past issues, we bring into the attention of the industry interested in the Romanian business environment the critical elements regarding other stipulations from the same legislative deed, since these become impediments that obstruct the normal operation of the economic activity. The current analyses refers to the Ministerial Order 1441/2011 on establishing the methodology for constitution and management of the financial guarantee for the producers of electrical and electronic equipment.

part IV

the industry under threat! Ministerial Order 1441/2011 The Romanian Ministry of Environment and Forests issued the Ministerial Order 1441/2011, to support the Government Decision 1037/2010 regarding waste electrical and electronic equipment (WEEE), and this Order refers to establishing the methodology for the set-up and management of the financial guarantee for the producers of electrical and electronic equipment. Elaborated without any prior

public meeting with the â&#x20AC;&#x153;actorsâ&#x20AC;? involved in WEEE management (producers, industry associations, recyclers, collective organizations), the Ministerial Order was initially posted for public debate on the website of the Romanian Ministry of Environment and Forests in the form of MO 1301/April28, 2011 already signed and stamped, later it was withdrawn and reposted as a draft on May 19, 2011 with a 10 day term

for submitting observations and suggestions. It was adopted 4 days after posting, on May 23rd, 2011. Besides procedural flaws related to its adoption, the legislative deed contains severe errors and its implementation can lead to both the violation of the provisions of the Directive, and also to unjustified and discriminatory expenses for the producers of some types of electrical and electronic equipment.

negative! This only proves that the calculation methodology is wrong, since it could lead to results that are 1. The fact that by using the types contrary to the purpose it serves. of equipment specified in Annex 1 A of GD 1037/2010, the order over- • The same situation can be found in looks that within the same category the case of the 3rd category, where the there are also equipment that reg- personal computers (PCs) and someister diferent waste management times even mobile phones can bring costs and are being treated by using profit from recycling them, while cathode ray tube (CRT) clearly have different technologies. a significant recycling cost. CombinExample: ing the two of them to establish a • Thus, for the 1st category from Annex 3 of the MO 1441/2010 – Large medium cost could lead to doubtful household aplliances, the incomes results. from recycling large household appliances (because in the current situa- 2. The mass of the products is not tion of the prices for metal, recycling taken into account, only the units washing machines, hoods, ovens are, although there are huge difetc. are actually bringing revenue) ferences between the mass of the are combined with the recycling products introduced on the market expenses of the refrigerators. Tak- and the average weight of collected ing into account the fact that there wastes (used for establishing the is an almost even distribution – 50% guarantee). refrigerators and 50% other large This method of calculus discrimihousehold appliances, and also the natory penalizes EEE producers of fact that in old EU member states the small dimension appliances, since incomes from recycling large house- the value of the guarantee is estabhold appliances are becoming similar lished based on the recycling costs to the costs for recycling refrigerators, for large appliances – representing in short time we can find ourselves most of the WEEE treated. in the ridiculous situation in which Example: the value of the guarantee resulted • For the 3rd category – in the case could be 0 or even worse, it could be of IT and telecommunication equip-

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The main flaws are:

ment, when establishing the guarantee, the average weight of the WEEE that is used is usually formed of CRTs, printers and central units. If we take into consideration the fact that the weight is usually set from the average composition on 33% CRTs weighing 15 kg and 66% other equipment weighing an average of 4 kg, then when establishing the guarantee, it is used an average mass of 7.5 kg. This is far from reality for a large range of products (mobile phones, tablet PC, GPS, netbooks, laptops). It is no longer valid even for displays, since the ones like CRT have been replaced with LCD, their mass decreasing to approximately 4kg. The only range of products that is compliant is the one of the central units. Practically, we have a guarantee for the present products miscalculated by taking into consideration the mass of the products from the past (much higher than of the current products). • For the 4th category – Large consume equipment, the average weight of used consumer electronics when establishing the guarantee means 85% CRT TV sets of approximately 25 kg and 15% other equipment of 2-3 kg/unit (DVD players, CD players),

that leads to an average weight of 21.5 lished depending on the categories Art. 8 Paragraph 2 of the Direckg, for establishing the guarantee and and also on the sold units, this means tive 2002/96/EC which stipulates associated costs especially in the case that they will be refunded only with that ensuring the guarantee is a of CRT treatment. The new LCD or the proof of collection and treatment responsibility specific for “new” LED TV sets weigh an average 15- of an equivalent number of equipment equipment (introduced on the 16 kg (for 81 or 94 cm in diagonal), from the respective category. There- market after January 1st, 2007). and this means that the value for the fore, there is the possibility that a TV Directive 2002/96/EC establishes calculus when establishing the guar- producer can provide the recycling at Art. 8 Paragraph 2 that the proantee is no longer compliant even to of an equivalent number of small ducers are responsible for financequipment in the same category (e.g.: ing waste management operations the largest appliances. • As extreme examples, from mp3 players, DVD players) and be of WEEE coming from their own the 3rd category, the central units exonerated from other obligations, products, put on the market after weighing 8 kg or more have the although the ratio between the mass August 13th, 2005 (January 1st, same guarantee as a mobile tele- of the two appliances could be over 2007 for Romania). The same phone of 100 grams, and in the 4th 300:1 (for a TV set weighing 15-16 article establishes the necessity of a guarantee that ensures that category the plasma TV sets with kg and an mp3 player of 50 g)! 120 cm in diagonal and weighing The same thing is true in the case the obligation is fulfilled, and the 20-25 kg have the same guarantee of 3rd category equipment, where guarantee can be used only for a producer of central units could the equipment put on the market as a 50 grams mp3 player! collect and recycle mobile phones, by the respective producer after 3. The conditions regarding fulfill- thus the ratio between the mass of January 1st, 2007. In the same time, ing the obligations and reimbursing the equipment could reach 80: 1 (for MO 1441/2011 stipulates that the the guarantee are unclear. an 8 kg unit and a mobile phone amounts of money coming from the execution of the guaranties Both the MO 1441/2011 and the GD of 100 g)! may be transferred to the collec1037/ 2010 are ambiguous in regards to equipment that should be treated 4. The provisions of Art. 6 of the tive organizations which provide and collected to prove the compliance MO1441/2011 as it is written, allow documents of the management of with the obligations and getting back the compliance with the obligations additional quantities of any type of the guarantee. The term used is the by managing any type of WEEE, WEEE (irrespective of the producone of “category” which normally including wastes coming from ers or the date it was introduced means categories from Annex 1 A of historical equipment (put on the on the market). This is a violation GD 1037/2010. Taking into account market before January 1st, 2007). of Art. 8 Paragraph 2 of Directive that also the guarantees are estab- This fact is a clear violation of 2002/96/EC.

mergers & acquisitions Limited financial resources, barriers to negotiations, and the gap between the buyer’s and seller’s views on the real value of the business concerned are among the hurdles that stand in the way of the successful completion of M&As nowadays. By Dana Verdes

No deal: M&A market struggles to bounce back L

awyers working on Romania’s largest M&A transaction so far this year put in several months of discussions and negotiations. Mid-September saw Tuca Zbarcea & Asociatii lawyers advising Erste Bank on reaching an agreement in principle with four of the bank’s five minority shareholders regarding the takeover of a 24.12 percent stake in Romania’s largest commercial bank, Banca Comerciala Romana (BCR) - the largest transaction concluded in Romania since the beginning of the year. This year’s M&A market is not posting the spectacular numbers it was pre-crisis, and it is getting harder and harder for buyers, sellers, lawyers and consultants to strike deals as the market parameters are constantly changing. “We made, in our client’s name, an offer for an IT firm, after six months. The client was so scrupulous that they researched everything and the process took over half a year. It is unnatural for this market and subsequently the situation of the company for sale deteriorated and the investors dropped out. Now, we have a market at the buyer’s mercy,” Doru Lionachescu, managing partner of the investment firm Capital Partners, tells The Diplomat-Bucharest.

What’s changed on the M&A market?

The managing partner believes that Romania is passing through a stage where the quality

20 The Diplomat October 2011

of investors will change, as major investors from Western Europe and American retreat from the area. “Romania is a very small market, not only in terms of M&A. In many sectors we are insignificant. For instance, although Orange is the local market leader, Orange Romania accounts for just 2 percent of the group turnover. We are too small, with no growth prospects, we are not viewed too well by investors and nor does the fiscal climate help us,” said Lionachescu. In his opinion, where the market is unpredictable and the situation in Europe is also unpredictable, the rules of negotiation change from week to week. “Another problem for the local M&A market is that next year is an election year. Whoever does not get to finish the transaction by the end of the year will become even more reluctant to make a commitment,” said the partner.

of about EUR 1 million each or even less, and the focus is on software and the online businesses.” Sorin David, partner at D&B David si Baias, talks about investors’ interest in goods production of any kind, financial services and even real estate, but “only if the price is low.” “It seems that financial investors are more interested in the business development opportunities presented by Romania than the strategic ones, especially in energy and natural resources. Investors seem to be more inclined to acquire strong businesses or at least businesses with growth potential rather that troubled ones,” said Damian. Moreover, David said “Investors are looking for companies with significant market share, while speculative investors are searching for distressed assets that can be sold at the lowest price possible.”

What’s interesting to buy?

Investors still have to cope with limited financial resources, in spite of banks currently voicing more interest and willingness to support various investment projects. “It is therefore very important, critical even, for the successful outcome of an acquisition project that any potential investor be aware of the available means to raise finance, if necessary, and prepared to negotiate various pricing alternatives and arrangements with the seller,” said Damian.

There are certain sectors with significant investment potential, such as energy and natural resources, including oil and gas, infrastructure (roads, railways, airports, bridges, water and wastewater treatment plants etc), pharma, FMCG and IT, Stefan Damian, deputy managing partner at Tuca Zbarcea & Asociatii, told The Diplomat-Bucharest. In IT, Dan Visoiu, partner with Biris Goran, added, “We are talking about deals

M&A millstones

mergers & acquisitions He also cited external factors which may also pose a significant threat to the successful completion of M&As nowadays, such as the slowdown in international economic growth and the concerns over a sovereign debt crisis in the Euro area. Daniel Voicu, managing partner with Voicu & Filipescu says that the failure of many transactions derived from parties’ difficulties in reaching agreement on the correct evaluation of the business concerned. “To these differences in perception of the potential, trends and development strategy are added the uncertainties introduced into the equation by the market’s instability and the variable level of investment needs, due to insufficient confidence in this period,” said Voicu. According to Visoiu, while before 2008 sellers were setting their asking price based on the EBITDA times 10, now this variable fluctuates between 2 and 2.5 or sometimes 3. Damian believes that sometimes the remedy is quite simple: the investor should hire qualified advisors that are more educated and have a better view and perspective on the actual value of a business. Discounts, compared to the “golden age”, could go up to 50 percent or even higher, depending on the sector.

billion euro is the estimated value of the local M&A market for this year according to specialists “Price expectancy discrepancies can sometimes be removed by earn-out clauses, or the seller retaining a minority position that it can then sell later at a better price,” said David.

Shaky market

Market players expect the local M&A market this year to post similar results as last year. “I hope the M&A market will remain at last year’s level of about EUR 350 million, which is almost nothing for mergers and acquisitions,” said Lionachescu. Other specialists talk of a market that will surpass the billion barrier. “I believe the local mergers and acquisitions market will go above EUR 1 billion this

year and continue the positive trend over the next six years,” said Visoiu. Law firm Tuca Zbarcea & Asociatii alone has been involved in transactions worth more than half a billion euro since the beginning of the year, including the second largest transaction concluded in Q1, 2011, CEZ’s acquisition of a 100 percent stake in TMK Hydroenergy Power. Biris Goran talks of eight transactions (completed this year and ongoing) this year with a total value of EUR 80 million. D&B David si Baias reports for H1, 2011, four transactions with a total estimated value of EUR 17 million. “Currently, we have another five ongoing transactions in different stages and we are starting work on the other four,” said David. Also this year, Voicu assisted the seller in the acquisition of AutoItalia Group by Mediterranean Car Agency, the first sale ever on the local car market. Radu Stoicoviciu, partner, advisory leader at PwC Romania, told The Diplomat-Bucharest that 2011-2012 will bring an increase over 2010. “We don’t expect this growth to be significant, unless there are large transactions. Activity should pick up pace in the coming period due to distressed transactions,” added Stoicoviciu. ■

logistic centers

The Ploiesti West Park is Alinso Group’s first investment in the CEE region

Efficient logistics a walk in the park What is the first step in developing an efficient logistics chain? In Romania at least, the booming consumption of recent years had driven high demand for the distribution of goods throughout Romania and outside its borders, making the need for road, railway and port infrastructure something companies had to grin and bear. Now that demand and consumption have shrunk, logistics operators have made changes to their businesses to reflect their clients’ behavior on a rather quiet industrial segment. By Magda Purice

here is now approximate stock of 1.5 million A-class industrial space in Romania, a similar value to Budapest, with Bucharest accounting for almost three quarters of the total, according to estimations by Cushman & Wakefield, the real estate broker and consultant. No matter how the figures may differ between one report or another, the development of industrial space on the local market closely follows the pace of the economy and the business movements of different players in key industries.

22 The Diplomat October 2011

Price consciousness

Asked to name a crucial factor for supply and demand on the industrial space segment, George Teleman, managing partner of the British fund Equest Balkan Properties, would say price. The manager has observed a distinct type of tenant in the last few years, separate from the typical retail buyer, one who hunts bargains. “When they buy, some will only choose ‘promotions’. The decisive factor is only the price asked today and not the benefits and solutions integrated into the infrastructure and logistics offer,” Tele-

man told The Diplomat-Bucharest. Summing up the current market conditions, he acknowledges the “good momentum for investments”, defined by land prices that are currently down 75-80 percent from 2008, the migration of investments towards the outskirts of Bucharest or major cities around Romania and falling construction prices. On top of this, there is the decline in speculative investments, the essential nature of prelease contracts and the big question of competitiveness and bank credit. As in other markets, the investment appetite is only for premium projects, “too rare in Romania”,

logistic centers

“We have so far invested around EUR 750 million in the Ploiesti West Park, our first investment in the CEE region” Ivan Lokere, CEO of Alinso Group

says Teleman. At the beginning of this year, the British fund EBP, which manages the 56,000-sqm Equest Logistic Center in west Bucharest, sold for a symbolic sum a majority 51 percent stake in the commercial centers Vitantis Bucharest and Moldova Mall in Iasi to a company managed by Teleman. At that time, the manager said that the plan with the two commercials centers was to manage them until the market could recover, in four-five years.

Where to set up camp

When mapping the largest industrial projects completed so far around the country, logistics and industrial hubs correlate to the largest manufacturing production plants, such as Pitesti for its Renault plant, and Ploiesti, where large FMCG companies such as Unilever and P&G have pitched their flags. Regarding the net take-up figures for different industries this year, logistics and transport operators account for a 35 percent share of occupancy, followed by FMCG and automotive, on 30 percent, according to a study conducted by real estate consultancy company Colliers. A recent King Sturge report stated that only production facilities in regions that are home to automotive suppliers are seeing increased demand, with the automotive and spare parts segments among the few to post stable growth this year. Therefore, logistics facilities are in most demand in Timisoara, Arad, Pitesti, Cluj

and Sibiu. In these locations, local and international developers such as Point Park Properties, GE/Helios Phoenix, CTP and WDP have acquired land for further development. At the beginning of this year, Gabriel Sfetcu, head of industrial at Cushman & Wakefield, predicted a growing trend for the industrial segment this year. “There are several positive signals on the market from companies that will start relocation and expansion projects in 2011, after postponing them in 2009 and 2010,” said Sfectu. However, according to the consultancy and evaluation company Darian, this year’s logistics market will look to a certain extent the same as it did in 2010, with vacancy rates staying similar in the absence of demand.

Client first, warehouse next

Demand on the Romanian industrial segment is driven by the same type of tenants as in other Central and Eastern European countries, according to Colliers. Logistics hubs and industrial parks developed so far in Romania cater to roof production, the manufacturing and assembly sector, retailers and wholesalers, and logistic operators. While, according to Eurostat, retail and FMCG recorded a drop of 5 percent in February this year, the effect has been seen directly in demand for logistics spaces. All logistic operators report that there are no more warehousing developments or speculative investments in developing large industrial spaces in order to attract tenants. That trend has now been replaced with project-based developments, mostly built around existing logistics facilities close to big Romanian cities. According to Colliers, retailers

accounted for just an 8 percent share of the occupancy rate within industrial parks in 2010, unlike recent years when most of the demand came from this sector.

Who’s buying?

Still, a few transactions have been completed so far this year in this real estate division. The largest ones came from Ikea, which extended the contract for the 10,000 sqm it occupies in Bucharest West Park, and the 5,350-sqm space rented by Sarantis within Millennium Logistics Park, both flagged up by real estate broker and consultant Colliers. Another transaction in the first months of the year was the leasing of 7,000 sqm by logistics company Gebrueder Weiss within Europolis Park Bucharest. Last year, the leasing industrial market started to come to life, at least compared with 2009, a very poor year with just an estimated 46,000 sqm leased countrywide. Cited by different real estate brokers, some of the largest leasing transactions comprised the take-up of 5,000 sqm by the automotive company AG&Co within Warehouses De Pauw Pitesti and Geodis Calberson leasing 17,400 sqm within Prologis Park. Among the industrial space transactions managed by another big player, CB Richard Ellis, was the 12,000-sqm space leased by OTZ Logistic in Ploiesti West Park, developed and owned by the Belgian company Alinso.

“The decisive factor is only the price asked today and not the benefits and solutions integrated into the infrastructure and logistics offer”

George Teleman, managing partner of the British fund Equest Balkan Properties 23

logistic centers

“Romania must capitalize on its infrastructure potential delivered both by the Black Sea and the Danube” Costin Lianu, manager at MECMA

In Romania, the Belgian company WDP currently owns approximately 2 million sqm of land, in 10 key locations close to Bucharest, Pitesti, Ploiesti, Constanta and Brasov. According to Valentin Stanciulescu, business development manager at WDP Romania, this year has been a good one for WDP as it started developments on its first industrial park in Oarja, Arges, with a focus on automotive (main customers: Roechling Automotive, HP Pelzer Pimsa). Until now, according to the manager, the company has secured three industrial park titles, which grant land and building tax payment exemptions for tenants, for their sites and a financing line for its future developments in Romania from the European Investment Bank.

A3 highway the path to profits?

The logistics development near Ploiesti is a partnership between the Belgians from Alinso and the Romanian businessman Petrica Usurelu, owner of construction materials distributor Piritex, who holds 20 percent of Ploiesti West Park. Their ambitions regarding leasing contracts for this year are high, with the businessman hoping to attract 10 large multinational companies to the park by yearend. So far, Ploiesti West Park houses Unilever, British American Tobacco, OTZ Logistics, Lufkin and Toro. “This is the first investment in the CEE region by Alinso and we have so far invested around EUR 750 million in the

location,” Ivan Lokere, CEO of Alinso Group, tells The Diplomat-Bucharest. The park, on the route from Ploiesti to Targoviste, is strategically located to provide direct access to the future A3 Bucharest-Ploiesti highway. As part of a total of 250 hectares developed also for individual plots for SMEs and retail and leisure, Ploiesti West Park provides an industrial area of approximately 60 hectares, of which 37 hectares have already been sold, and a logistics area of 62 hectares. The transactions completed this year comprised the delivery of the second, 20,000-sqm logistics building, while in June Alinso finished the first SME building from a phase totaling almost 18,000 sqm. The park also provides full access to the first intermodal terminal, Euro Gate Terminal. “This is the first privately owned international railway terminal in this region for Romania,” said Lokere. The terminal, which is the first phase of construction, will link the industrial activities carried out within the park to the national railway network, the Western border and the Black Sea ports. It is not only the Belgians of Alinso who are pinning their hopes on the future A3 highway, which looks impressive on the presentation brochures and flyers of different companies linking their projects to the infrastructure dream in Romania. According to a report by CB Richard Ellis, activities targeting production and logistics will have their focus outside Bucharest, while the capital will attract developers targeting already operational facilities in the future. The study quotes the lease of 33 hectares by Luf kin Industries within Ploiesti West Park. Another industrial park bordering Bucharest to the south is the Millennium Logistics Park Bucharest, developed by Polish investors.

The property consists of 56 hectares of land, with two large frontages to the DN4 Highway and, importantly, borders the new Tnuva dairy production plant. The first tenant in the park was Golden Foods, which rented 6,000 sqm in 2010.

Investors’ call for action

The fully operational A1 highway to Pitesti attracted 11 of a total of 15 logistics parks developed all around and within Bucharest city, to mention just a few well known names: Prologis, A1 Business Park, Equest Logistics Park, Mercury Logistic Park, Europolis Logistics Park and Bucharest West. There is no better sign of the need for a clearer and more dynamic infrastructure program in Romania, according to Hans Smaling, the Counselor of Economic and Commercial Affairs of the Embassy of the Kingdom of the Netherlands. The Netherlands business community supports the idea of Romania becoming the East Gate Trade Hub of the CEE region, but only if the right transportation and logistics policies are implemented locally, supported by Government regulations. The benefits of moving faster ahead with the logistics national strategy are great. Hans Smaling told The DiplomatBucharest that around 175,000 jobs can be created within the major logistics hubs in Romania, especially by developing the Constanta harbor as a logistics hub and an alternative to Europe’s busiest port, Rotter-

“This year was a good one for WDP as we started developments on our first industrial park in Oarja, Arges, with a focus on automotive” Valentin Stanciulescu, Business Development Manager at WDP Romania

24 The Diplomat October 2011

logistic centers dam. The authorities estimate that around EUR 10 billion can be added to Romania’s GDP in the next decade, once the development of such a strategy is in place.

Paper plans

Romania also has an inter-modal strategy for 2011- 2020, to be in line with the European Union Strategy “Europe 2020”, according to an official document. The overall policy of this strategy targets the development of green corridors into the European market, and it is also an important ingredient in the European Gateways project. In March 2010, the White Paper “Empowering Romania as the Eastgate Trade Hub of Europe” was discussed with the Presidential Administration and a first draft was handed to the Ministry of the Economy, Trade and Business Environment (MECMA) the next month. Within this period, steps have been taken in drafting budgets, making cost estimates and devising lobby strategies through Romania’s National Export Strategy, coordinated by Costin Lianu, manager at MECMA. “Romania must capitalize on its fortu-

nate geographical positioning and the infrastructure potential delivered both by the Black Sea region and the Danube corridor for this strategy to bear fruit,” said Lianu. Still, with all the strategies looking good on paper and the draft projects circulating among the authorities’ and relevant institutions’ desks, Romania still bases its transportation and logistics operations on roads, whether highways or simply substandard national roads. Industrial park developers have tried so far to camp as close as possible to the viable transportation routes and adapt to the current conditions. ■ CORRECTION: In the article ‘Operational leasing firms trumpet benefits in drive for market share’ published in The DiplomatBucharest Vol.7, No.5, June 2011 the sources of the information in the box ‘Operational leasing market players’ are the Romanian Operational Leasing Companies Association (ASLO) and companies in the field.

Leasing transactions within logistics parks Supply Bucharest: 1 mln sqm stock Countrywide: 17,800 sqm from Allinso in Ploiesti West Park Demand Bucharest: 75,000 sqm (includes lease renewals and extensions) Countrywide: 48,000 sqm (Deva, Pitesti and Ploiesti) Rents Prime rents: EUR 3.5-4 sqm / month Services charged: 10-20 percent of rent Forecast 2011 Countrywide deliver plans: 70,000 sqm National take-up: 100,000-150,000 sqm (Source: Jones Lang LaSalle )

Severe lack of hospice care in Romania October 8th is the “World Hospice and Palliative Care Day”, a unified day of action to support hospice care around the world. Hospice care (also called palliative care) is the holistic care of patients with life-limiting diseases and their families. It is a recognised medical care, treating the distressing symptoms that accompany illness, especially pain. Many people could benefit from hospice care and yet it is often not available. There is a huge demand in Romania for palliative care: Less than 7% of patients with life limiting diseases receive palliative care perfectly adjusted to their needs – the relief of pain and psychological support. This means that the majority in Romania

have no access to palliative care. There are 26 counties in Romania out of 41 where there are no palliative care services at all. 75% of Romanian patients that are diagnosed with cancer find out about their disease only in a terminal stage, many of them being sent home and receiving only minimal support from specialized personnel. Over 60,000 Romanians die of cancer every year. Hospice Casa Sperantei is a non-profit organisation and is the leading provider of free palliative care services in Romania. It is dedicated to the development of palliative care by providing medical assistance, social, psycho-emotional and spiritual support for patients with life-

threatening diseases and their families in their centers in Brasov and Bucharest as well as in some rural areas in the Brasov county. Professional doctors, nurses, social workers, psychologists, therapist and chaplains work together and provide free of charge, specialized services for adults and children, adapted to their disease. Patients can be cared for either at home by the home care team or in the inpatients units as well as in the day centers or the outpatient clinic – as they wish and adapted to

the stage of evolution of their disease. Edelweiss Ball – A major charity event by Hospice Casa Sperantei This year Hospice Casa Sperantei’s 11th Edelweiss Charity Ball will take place at the Radisson Blu Hotel Bucharest on November 19th 2011, and will help to provide care for more than 1,700 patients in 2012 in Bucharest. Tickets are by invitation only and can be asked for by emailing events@ hospice.ro.

logistic centers

Largest industrial parks and logistics centers in Romania CLUJ Tetarom 3 Park – Nokia production Facility (set to close) Investment: EUR 60 mln

TIMISOARA –ARAD PITT Developer: local council Timis Investment: EUR 3.7 mln Surface:18.4 hectares Olympian Park Timisoara Developer: GE Real Estate and Helios Phoenix Real Estate Surface: 17 hectares Uta Parks Arad 1 & 2 Developer: Codlea Arctic Surface: 32 hectares Industrial Park Eurobusiness Oradea Owner: Oradea City Hall Surface: 121 hectares

BRASOV-SIBIU Olympian Park Brasov Developer: GE Real Estate, Helios Phoenix Real Estate Surface: 9.3 hectares Industrial Park Brasov Management: Pro Roman Surface: 104.5 hectares Prejmer Industrial Park Developer: Graells&Llonch Invest Surface: 82.36 hectares Sibiu Industrial Park Developer: Parcul Industrial Sibiu Surface: 98 hectares

CRAIOVA-PITESTI Pitesti-Bradu Industrial Park Surface: 14.07 hectares Developer: Argecom Pitesti and Simarc Pitesti Mioveni – Dacia Renault production facility Manager: Renault Group Investment: EUR 214 mln

Source: King Sturge, Romanian Agency for Foreign Investment, The Association of Industrial, Technological, Scientific Parks and Business Incubators (APITSIAR) 26 The Diplomat October 2011

Craiova Industrial Park Surface: 10.3 hectares Owner: Dolj local council Ford Production Facility Owner: Ford company Investment: EUR 675 mln

logistic centers

IASI Tehnopolis Science & Technology Park Surface: 10.73 hectares, Manager: Tehnopolis Delphi production facility Manager: Delphi Investment: EUR 100 mln

CONSTANTA- GALATI Rompetrol Industrial Park Surface: 50 hectares Owner: Rompetrol Galati Industrial Park Surface: 22 hectares Owner: Local council Galati

GIURGIU- PLOIESTI & Western Bucharest Logistics Parks Ploiesti West Park Bucharest West Park Europolis Park Bucharest Developer: Alinso Developer: Portland Trust Developer: Cefin Real Estate Surface: 220 hectares Surface: 90 hectares Asset Management Owner: CA Immo Investment: EUR 750 mln Millennium Logistics Park Investment: EUR 150 mln A1 Business Park Bucharest Sud Surface: 30 hectares Developer: Cefin Real Estate Surface: 56 hectares ProLogis Park Bucharest 1 Asset Management European Logistics Park Owner: Valad Property Group Developer: European Developer: ProLogis Inc. Surface: 70 hectares Surface: 29.5 hectares Logistics Management Investment: EUR 200 mln Investment: EUR 150 million Surface: 32 hectares

Mercury Logistic park Developer: Helios Phoenix Surface: 19 hectares WDP with 10 plots in Romania, including 4 in this region Developer: WDP Investment: EUR 200 mln Surface: 25 hectares

logistic operators

Getting the economic engine in gear Players on the goods movement market are keeping their fingers crossed that improvements to their work tools – regulations, good road infrastructure and a functional sea harbor – will come sooner rather than later. In the meantime, the quest for clients continues through different market strategies, including innovation in delivered solutions, cutting prices, joining forces in partnerships, or investments. By Magda Purice

“W

hat really matters is how and when Apart from the two logistics centers in the product reaches the shelf,” Dra- Bucharest, KLG Europe operates in Congos Geletu, managing director of stanta, Craiova, Cluj-Napoca, Timisoara and KLG Europe Logistics, the Romanian office Targu Secuiesc, with premises totaling 35,000 of Dutch company KLG Europe, tells The sqm. The company’s clients include Orange, Diplomat-Bucharest of the essence of the 3M, Adidas, Wrigley, Panasonic, LG and business he manages. With this in mind, the Cramele Recas. This year, the manager expects a turncompany’s strategy is to focus on decreasing over of EUR 18 million, while in 2010 the the delivery time to its customer to 24 hours for grouping transports, while a fair time for firm reached a turnover of EUR 15.5 million. different logistics orders is within 48 hours, “Back in 2007 when we entered the local market, we planned a turnover of EUR 2 million, according to the KLG manager. The pressure on prices, integrated logistics but we ended the year with EUR 7.5 million solutions and delivery is being felt across the in turnover,” says Geletu. In 2008 and 2009, entire logistics market. According to Geletu, years when the market in Romania had started delivery time has decreased significantly to slow, the company almost doubled its turnsince 2008, when a transport order could have over. In 2010, KLG invested over EUR 20 been completed within 48-72 hours. million in the Prologis Park. As well as managing the company’s operations in Romania, the KLG Europe Logistics Profit margins managing director is involved in the Roma- under pressure nian strategy of becoming a regional trade hub “There is a lot of room on the logistics soluin Europe, as a member of the Romania-Hol- tions providers market,” says Danor Ionescu, land Commerce and Industry Chamber. CEO of Delamode Romania, one of the larg“VAT deferment is one of the biggest issues est providers of transportation and logistics that need to be resolved in order to attract services on the local market. The company more investors to Romania,” he states. “The is specialized in groupage transport services, ball is now in the authorities’ court, as they which account for 70 percent of the entire business. have to act on different regulations in order to animate logistics infrastructure locally.” Even in the last three years, Delamode has Geletu mentions the area of Constanta and its registered a rising number of clients, but the port, where KLG has a logistics center. growth rate has declined year on year since

28 The Diplomat October 2011

2008. According to company information, Delamode Romania registered a 32 percent turnover hike in 2009 followed by another 24 percent increase in 2010. This year, the manager expects growth of 11 percent on the previous year. “We can feel the pressure on profit margins all over this market. In short, a company now works harder for less money,” the manager says. As a transportation company working with 600- 800 subcontractors, Delamode operates transports for large German companies such as Praktiker, Real and Metro, as well as for companies like IBM, for which Delamode provides more complex services. “All the Metro containers coming from the Far East region complete the customs formalities through our office,” explains Danor Ionescu, referring to the location of Delamode office, close to one of its most important clients’ local operations. Location is everything to a logistics transporter, which is why, like other competitors on the market, the company owns seven logistics hubs countrywide and conducts 4,000 transport operations monthly. This year, the company plans to achieve a turnover of EUR 17 million, up EUR 2 million on 2010. For Ionescu, one of the biggest challenges on the market is the protracted payment periods, which force the company to have an increased working capital. The lack of road

logistic operators

“VAT deferment is one of the big issues that need to be solved in order to attract investors to Romania”

Dragos Geletu, managing director of KLG Europe Logistics infrastructure is another brake for logistics operators. “You can drive 600 km in Europe within six hours, while the same distance can take 12 hours in Romania,” details Ionescu. But Delamode plays friendly in its market and sometimes signs partnerships with competitors in order to faster and better serve a client. “It is a very useful solution both for us and our clients, in the absence of an intermodal infrastructure.” Romania still offers a growing market for logistics. For instance, Germany has an 80 percent rate of logistics outsourcing services, while in Romania the figure is less than 30 percent,” says Delamode Romania’s CEO.

Air and sea cargo transportation more profitable

“The real money comes from air and sea cargo transportation,” Marius Serban, country manager of DHL Logistics, the air and maritime Romanian division of Deutsche Post DHL, tells The Diplomat-Bucharest. With current business expectations of EUR 40 million, slightly up on 2010’s performance, DHL Logistics is a company of 38 people, drawing on the knowhow and business infrastructure of a logistics giant. “One of our most valuable assets is adaptability to the customer’s needs. Being part of a larger group of different logistics divisions, we can adjust in order to provide the best solution for a transport order,” says Serban. In 2004, when DHL took over the Austrian investment of local company Cargo Line and formed the DHL Logistics, Serban became

head of this new entity. “While in 2004, the company achieved an EBITDA of EUR 40 million, it is predicted to be EUR 1.5 million in 2011,” says Serban. Back then, Cargo Line, the future DHL Logistics, had 14 employees. “The company was among the very first expedition houses in Romania, operating before 1989,” says Serban. Raised in a family active in the logistics field – his father was running a transportation company at the time – Marius wanted to embrace different work experience and areas of logistics. In 1996, he started working for his father in the family transport business. Some years later, the young Serban wanted to gain his independence, and spent several months in the US then carrying out distribution and customs activities for a clothes retail production company in some eastern Romanian cities. During these years, Serban specialized in air and sea transportation, looking at the numbers in a pragmatic way. According to his calculations, the profit on a transportation order by truck is around EUR 50-80, while air transportation can deliver a profit of EUR 100-150 for the same transport order. “There is a profit of 5-7 cents per kilo in the air transportation business,” details Serban. However, there are significant differences between Romanian operations and those in Western countries. For instance, according to Marius Serban, Germany sees 80 import operations daily while in Romania the figure is 50-80 containers per month. “Still, profits are not always found in volumes,” says Serban. DHL Logistics has clients from various fields, including Nokia, Kaufland, Sony and Dacia. Business on the automotive segment, one of the few delivering good numbers in the current economic gloom, is sought after by most logistics operators.

Looking to Russia

The second biggest logistics solutions provider in Romania by turnover, according to the

company’s official data, is Gefco. A non-asset company, it looks at any business opportunities it can find on the local logistics market, using a combined portfolio of intermodal transportation and warehousing solutions for its multinational clients locally. Most of these clients are active within the automotive sector, like Dacia, but they also include electronics, white and brown goods producers such as Arctic and Electrolux, and retailers, including Carrefour, Kiabi and Mega Image. Following its operations in Romania of recent years , Gefco, which ranks among the top ten logistics integrators in Europe, achieved a year-on-year growth of 44 percent between 2009 and 2010 and that growth is predicted to continue in the coming years. According to Tolga Oran, director of sales and marketing at Gefco Romania, the growth is sustained on two fronts: “We look both into European markets where consumption has increased for the industries we are focusing on, and we also target other markets like Russia and countries in Central Asia, such as Kazakhstan.” Last year, Gefco achieved a turnover of EUR 33 million in Romania. The firm operates 100 trucks per day and has a managed fleet of more than 100 wagons for transporting finished vehicles. For markets outside Europe, Gefco delivers transport solutions such as sea transportation, port operations and distribution for chemical products. It manages up to 50 trucks per week from Romania to Russia and very much depends on local infrastructure opportunities. Even though the firm is “happy” to use Constanta harbor operations as part of its

“The real money comes from air and sea cargo transportation. The profit for an order by truck is EUR 50-80, while by air the profit is EUR 100-150” Marius Serban, DHL Logistics country manager

logistic operators

“We operate on a market that is not so transparent, but very flexible. You can start with a certain quotation and end with an entirely different one” Cristian Negrutiu, logistics director at DSV Solutions

intermodal solutions, Gefco underlines the possible “danger” coming from other ports and regions, one such being Koper in Slovenia. “The Slovenian port can be a good competitor for Constanta, offering similar transportation solutions prices and a better infrastructure for logistics operations,” Oran told The Diplomat-Bucharest. This month, Gefco officially launched the new 4,000-sqm space it had rented within Prologis park, which will join the existing warehouse run by the company in Arad. The firm has a further three automotive platforms in Curtici, Mioveni and Bucharest. A major client is Dacia, to whose account Gefco has exclusively assigned a team of 15 people, according to Oran, from a total headcount of 100 by the end of 2011.

Focusing on growing industries

Also part of the giant Deutsche Post DHL, the local division of DHL Freight, through its country manager Cosmin Ionescu, defines the segment of logistics solutions providers as “a market of costs.” In line with his colleague at DHL Logistics, Ionescu cites adaptability as the main benefit for larger groups with specialized divisions. “There is a lack of transport and logistics solutions on the market, because everyone tends to offer standard solutions,” says Ionescu. The company delivers logistics services to a portfolio totaling 1,000 customers from different industries. Still, there are several strong sectors, such as retail, automotive and engineering parts. In the field of logistics and transport ser-

vices, the economic downturn reached the local market with a time lag. Ionescu says that the first falls came in the second half of 2009. Still, DHL Freight registered turnover growth of 20-30 percent year on year in this period, according to Ionescu. The positive business results followed several measures taken by the company in order to adjust to the new market conditions. “We focused on the retention of important clients, but we were also selective within the existing portfolio,” says the DHL Freight manager. One of the company’s strategies is to orientate towards clients in growing industries, such as automotive. The company’s plans in 2011 are to extend its logistics hub network to Arad and Cluj, joining the existing terminals in Bucharest and Timisoara. DHL Freight plans to boost its team to 40 employees by the end of 2011, from 35 staff members so far. By 2012, according to Ionescu, the company will have 50 workers. DHL Group operates 25 expedition and logistics hubs countrywide, including courier services. Recently, the company announced it was setting up a cargo aircraft and operational terminal at the airport in Cluj, joining its existing terminals in Bucharest and Arad.

Belgians join local market

Belgian group Essers uses a combination formula, unlike some of its fellow competitors on the logistics and transportation market. While for other companies, to own a fleet is a big headache and limits flexibility, Essers combines warehousing solutions with transportation services, both with subcontractors and its own fleet. With more than ten years on the Romanian market, the company expanded its Romanian team from 17 employees to almost 450 and from 15 trucks to 250 in 2010. Also, the group extended its logistics hubs and warehouse stock locally, from a small deposit of 5,000 sqm in Bucharest to nearly 70,000 sqm of space countrywide in cities such as Oradea,

“Clients on the Romanian market have started to have very specific needs regarding transportation services” Claudiu Hila, GM of the Romanian office of Pall Ex

30 The Diplomat October 2011

Roman, Timisoara, Sibiu and Cluj. The business looks good for the company but things might look even better “if the regulatory framework and the transport law worked also for the benefit of transport companies,” says Marc Paulissen, country manager of Essers Romania. According to company data, Essers carries out three railway transportation operations per week from Belgium to Oradea, totaling 80 to 90 containers. More widely throughout the industry, the Oradea hub is used as an import hub for goods distributed in Romania and also Bulgaria, Turkey and Greece. Essers is one of the companies with positive financial results, hoping for EUR 50 million in turnover by yearend, after achieving EUR 24 million In 2010. The growth expected for this year is viable, believes Paulissen, since the company had already reached a turnover of EUR 24 million by June this year.

Opportunities for newcomers

Another Belgium transporter tackling the Romanian market is the Van Moer group, represented in Romana by Alain Schodts, country manager. “Our strategy is projectbased,” says Schodts, whose company entered the Romanian market in January of this year. The company so far operates 30 trucks in Romania and has 25 drivers, with the latter figure likely to double. Van Moer expects a EUR 2 million turnover on the Romanian market, and currently works for clients such as P&G and Bosch. Voicing moderate optimism, Schodts

logistic operators thinks that there is still a long road until logistics hubs such as Rotterdam or Antwerp can be copy-pasted in Romania. Currently, Van Moer is contemplating taking over a shipping company in Constanta harbor, as part of the company’s strategy to develop its logistics operations in Romania. “For me, another important city in Romania for logistics is Timisoara,” says Schodts. Regarding the overall European strategy for logistics and the movements of different countries in this direction, the manager highlights the threat posed by Serbia, which plans to start negotiations to join the EU in 2012. “Romania might not catch this train of opportunities in logistics if the development pace remains as slow and rigid as it has been until now,” adds Schodts. A new entry on the transportation market is the UK-based Pall Ex, whose Romanian office will start operations this fall. The company specializes in pallet logistics transportation and targets the more specific needs of clients. “Clients on the Romanian market have started to have very specific needs regarding Catalin Olteanu, director at FM Logistic transportation services, and the structure of delivery has changed: lower transport volumes, volumes of transported goods, the manager more diverse sorts of goods and cost-effective has noticed an increase in automotive spare services,” says Claudiu Hila, general manager parts, like tires, while the FMCG segment of the Romanian office of Pall Ex. has shrunk. In order to compensate for the The company’s local development is part variability of businesses, DSV targets clients of a larger development plan, with Pall Ex from growing industries like the pharmaceutitargeting expansion on multiple markets such cal and automotive sectors. as Germany, France, Benelux, Turkey and “We operate on a market that is not so Poland, to join its established operations in transparent, but very flexible. For instance, Italy and Iberia. “The pattern of pallet-based you can start with a certain quotation and end merchandise transport is a common thing with an entirely different one,” Negrutiu says. in Western Europe but absent in the Eastern DSV now plans to increase its space in Bucharest West Park by 16,000 sqm, concentrating region, which is why we sense great growth potential starting with the Romanian office,” logistics solutions in western Bucharest after closing its Pipera site in 2010. So far, the firm says Hila. has around 50 clients, all multinational compaNo market for speculators nies acquired through local and international One of the main trends on the market cited tenders. According to company data, DSV provides logistics and transport for Samsung, by DSV Solutions’ logistics director Cristian Negrutiu is the decreasing trend of speculative Goodyear, Bridgestone, Heineken, Bergeninvestments. bier, Kraft, Milupa and Intersport, Vaillant According to the manager, the speculative and Ariston. trend has disappeared among investors as everyone works in a “project-based” way, and Dumping prices drag this is reflected in logistics operators’ opera- market down tions. DSV has 32,000 sqm in Bucharest West Established in 2006, transportation and logisPark and 2,000 trucks, subcontracting to its tics provider Ahead Logistics offers, like other players in this market, both warehousing and partners. Within the last few years, not only DSV but transportation services for its clients, who all the other logistics solutions providers have include Lidl and Penny Market. “Working observed a tendency in their clients’ business with large international companies is very to optimize stocks, sell warehoused goods fast strict: you have to deliver, no matter what,” and rotate merchandise in the deposits more Mircea Manescu, general manager of the quickly, through cross docking. Regarding the company, tells The Diplomat-Bucharest.

“With our road infrastructure, the endeavor seems very much like a Die Hard movie scenario,” he admits. The manager sees the same problems as other competitors in the same market, and the company is directly affected by the legal regulations in transportation and road traffic. Ahead Logistics purchased 45 trucks in which it has invested around EUR 5 million so far. It is easy then to imagine the direct link between road transportation legislation, the quality of drivers hired for the trucks, the conditions of road infrastructure in Romania and the way that all these affect company operations. On top of this, according to Manescu, dumping prices charged by some of its competitors are adding to the everyday challenges. Still, the company expects a EUR 4 million turnover this year, a comparable value to 2010, and continues to invest locally. It recently acquired a 67,000-sqm logistics center close to the Ploiesti ring-road, including two deposits of 8,500 sqm and a 15,000-sqm logistics platform. The location of Ploiesti was chosen for its direct link to railway infrastructure, according to Mircea Manescu.

“Owning a logistics center instead of renting it is much cost effective and delivers a more adjustable logistics set for the tenants”

Owning, not renting

On the same growing trend is FM Logistic, which had a turnover of EUR 20 million in 2010, and expects growth of 10 percent this year. Recently, the company launched a logistic platform in Petresti, in Dambovita County, following a EUR 15 million investment, consisting of 18,000 sqm, and it has plans to extend it to 120,000 sqm. According to Catalin Olteanu, director at FM Logistic, owning a logistics center instead of renting it is much more cost effective and delivers a more adjustable logistics set for the tenants. The retailer Cora is the company’s first partner in the development in Petresti. Besides this location, FM Logistics also operates logistics platforms and hubs in Cluj, Bacau, Dudestii Noi in Timis County and Cheajna in Ilfov County totaling 77,000 sqm. Over half of FM Logistics’ operations consist of warehousing and handling activities, while domestic transportation represents 40 percent. The company’s portfolio includes companies such as Cora, L’Oreal, Yves Rocher, Nestle and P&G. “We plan to increase turnover by 40 percent in the next three years and also increase the warehousing capacity in Timis, the logistics center in Bucharest and the transport operations,” says Catalin Olteanu of the company’s plans in the near future. ■ 31

RoRec Association launches program for local authorities

he Romanian Recycling Association RoRec is taking its actions on WEEE collection centers to the next level: “The WEEE collection systems inspired from WEEE Forum’s practice” is destined for local authorities interested in implementing a collection system for waste electric and electronic equipment (WEEE) that is both coherent and compliant with EU standards for collecting and recycling WEEE. The program was announced during The International Fair for Services and Public Utilities (TUP) at ROMEXPO, in the presence of the newly appointed President of the National Agency for Environment Protection, Gabriel Abos, the

National Guard for the Environment, local authorities, recyclers and white goods producers. With the support of the collective associations members of the WEEE Forum, that are located in Western Europe and have relevant experience and results, the RoRec Association has come up with a program with specific purpose of documentation through workshops. “In addition to launching the five locations from the RoRec Association’s National Network of WEEE Collection Centers, that was done in partnership with city halls, we offer our support to the communities in need of these kind of services, through our program that addresses local authorities’ repre-

sentatives. The purposes of the new program are documentation, know how transfer, and asimilating new working models in order to increase performance of the services offered to the population,” explained Liviu Popeneciu, president of the RoRec Association. “RoRec Association’s WEEE Collection Network is the solution that meets the needs of the community, of local authorities and also of producers,” added Liviu Popeneciu during the TUP fair. “The European legislation, transposed nationally, states that we should collect at least 4 kilograms of WEEE per capita every year. Through the recent GD 1037/2010, the Romanian Government estab-

lishes the obligation to have a WEEE collecting point in each locality, while in the case of cities – one for each 50,000 inhabitants. The responsability for the collecting points belongs to the public local authorities. This reflects into real opportunities to harmonize the community need so it can benefit from coherent structures of WEEE collection, with the need of the authorities – that must set up these centers and offer inhabitants a proximity service, and with the need of the producers that are responsible for taking over collected WEEE and financing waste treatment and recycling operations,” added the President of RoRec Association. „Setting up an infrastructure for the collecting centers is a solution

with potential for increasing the flow of electric waste, since today we are currently collecting around 1.2 – 1.5 kilograms per capita yearly,” said Gabriel Abos, State Secretary and newly appointed President of the National Agency for Environment Protection. Abos further suggested that authorities should pay more attention to this service destined for the population, thus contributing to avoiding infringement procedures for not complying with the annual quota imposed by current legislation. The infringement procedures translate into penalties that can reach several hundred thousands of euros per day, paid from everyone’s pocket: mayors, ministers, law makers, large entrepreneurs or small consumers. Although WEEE represents a small percentage from the total waste of a community, around 5-6 percent, their toxic components are extremely harmful for both the population and the environment. On the other hand they contain fractions that could be reintroduced in the industry, as secondary raw material, thus preventing irational exploitation of primary resources, since they could be recicled up to

93% with the help of state of the art technologies. The collecting process depends on two main factors: creating the necessary infrastructure for selective collecting in compliance with European regulations, and educating the general public to use this service. The communication session during TUP was an exchange of views between local authorities’ representatives that benefit from collecting solutions offered by RoRec Association, and the ones that are interested in implementing a WEEE collecting system. It also was a great opportunity to understand the realities of the entire waste management chain: collected quantity in a community is thoroughly supervised during treatment and recycling stages, so that valuable fractions obtained thourgh these processes could be reintroduced in the industrial circuit, while used technologies will not affect the environment and population health. The local authorities that are interested in this program can contact RoRec Association by phone on 021/2327182 or 021/2327183 and by e-mail at cristian.ionescu@rorec.ro, for more details referring to documentation themes, meeting agenda and travelling times.

office market

The real state of office real estate

A few years ago developers were eagerly building office space. Now the vacant stock is generating total monthly losses of EUR 6 million for its owners. However, builders and agents are optimistic and hope that in the near future the market will recover, after big companies announced their arrival in Romania, the construction of new projects began and the market started to see pre-lease contracts again. By Roxana Cristea

“

Soon we will start to build a new project in Piata Presei Libere – a 26-floor green office building of 35,000 sqm which will require an investment of about EUR 60-70 million,” Shimon Gallon, general manager of GTC, told The Diplomat-Bucharest of the company’s latest office scheme. Although he has not yet received all approvals and the necessary financing, the developer hopes to begin construction in a few months. While in the pre-crisis period office developments were constantly going up and the occupancy rate was decreasing month to month, immediately after the crisis started, most schemes were put on hold. Since then, only a few projects have been developed and completed. “What we have seen in recent months

34 The Diplomat October 2011

is that more and more projects – it is true, not at the rate at which they were being announced before the crisis – have restarted works. Also some old projects are beginning to be built and completed,” said

million euro is the monthly total loss that unoccupied office buildings generate for the owners

Ciprian Glodeanu, coordinator of the real estate practice at Wolf Theiss & Associates, adding that this year the work has begun to be more dynamic than previous recent years and some developers have even announced new projects.

Crisis talks

In mid-2008 the real estate market began to decline in all segments, and both developers and agents had only negative predictions for the coming years. The office market, a segment that was growing and seemed to have every chance to do well during the crisis, had to deal with two major changes. Not only was there was a decrease in both rents for office buildings and spaces in villas, but the stock of office space had increased con-

office market siderably. Currently in Romania more than 595,000 sqm is available in office buildings and approximately 112,000 sqm in villas, according to Esop Consulting. It is a very large stock given that during the last two years the absorption rate was somewhere around 200,000 sqm per year. “Under these circumstances, the big challenge for owners was to succeed to rent the space they have, given that there is a supply on this segment that will remain available for the next two years,” Mirela Raicu, partner with Esop Consulting, tells The Diplomat-Bucharest, adding that the un-let office space generates EUR 6 million of losses per month. But Bogdan Cernescu, Immorent GM, says that the problems began before the crisis, because the office building market had developed in an unsustainable way, as many developers built in locations that benefited only from future infrastructure promises. “In a way, the developers were running faster than those who had to build the infrastructure. It is obvious that at some point you run, run, run, but the track ends,” says Cernescu.

595,000 sqm is the current office building stock in Romania against a yearly absorption rate of about 200,000 sqm

Things got even more complicated because so many spaces remained vacant and the owners lost a lot of money. The good news is that Bucharest has a very limited basis of quality office buildings, and now things have started to balance out, according to consultants. The office stock left vacant before the crisis is beginning to fill up and it is clear that the bargaining power of tenants over owners is starting to wane. “The crisis helps us because there are many companies coming to Romania and hiring new people, and this means that they need space,” Horatiu Florescu, general director at consulting firm The

Advisers/Knight Frank, tells The Diplomat-Bucharest, adding that the market is working better now than in 2001, when there was no crisis.

Rent rush

Of late, developers have reduced their preferences to a simple wish, and that is to have tenants. Basically, the office market is in a cycle of rises and falls, which usually favors either owners or tenants. Between 2005 and 2008 it was an owners’ market, when landlords said how to build, what to build and set the rent. From 2009 the office market became a tenants’ market, when they started setting the agenda: conducting negotiations, establishing contacts and dictating terms. “We divided Bucharest into three areas: a central area, a semi-central area and the periphery. In the central area before the crisis rents were between EUR 20 and 30 per sqm, in the semi-central area EUR 16 to 22 per sqm and in the suburbs between EUR 15 and 18 per sqm,” says Maria Florea, associate director at Colliers, adding that since mid-2008 demand has decreased significantly and rents have fallen too by 20-30 percent.

office market

“What we have seen in recent months is that more and more projects have restarted works” Ciprian Glodeanu, coordinator of the real estate practice, Wolf Theiss & Associates

But not all types of buildings were affected. For Class A offices things have not changed, neither in terms of prices nor the demands of tenants, according to developer GTC. “In the future, rents will not increase so much, nor will they decrease noticeably. I think the market will remain at the same level, but what I foresee is that the central areas – I am referring to Piata Victoriei and easily accessible areas like Barbu Vacarescu and Floreasca – will see an upward trend,” predicts Madalina Cojocaru, head of the department office at DTZ Echinox. In terms of lease duration, from 2008 this began to decline, with rental periods varying between two and five months, depending on the total surface available and the level of rent. But average lease terms are currently from 8-10 months, reaching 14-16 months in certain buildings. “Many owners are still chasing illusory profits generated by a higher level of rent, and they do not realize that they are losing a lot of money every month by having empty spaces,” comments Raicu.

Hoping for stability

“What normally should follow in the coming period is the stabilization of the market: we need fair rents, a greater degree of stability and a vacancy rate of 10 percent,” says the Colliers official, adding that although it will not happen in 2012 things are moving in this direction.

A stable market is one that is balanced between owners and tenants, where rents are relatively constant long term, contracts are signed for a period of five to seven years and utilities charges are predictable. And, last but not least, one where Class A buildings have minimum criteria that allow them to be classified in this segment, such as the size of the floor, big spaces and green building status. “Our market is an immature market, not a mature one, but things are changing. Already we are seeing green buildings in Bucharest. That does not come from developers’ ambitions; it means that there is demand. And tenants are becoming more demanding. This means a stable market,” explains Cernescu.

Looking towards the center

“It is clear that Bucharest does not have what we call a central business park, and this is for several reasons: the way the city has evolved and developed and how infrastructure has developed,” says Cernescu of Immorent. But although there is no central business district, certain areas are entirely dedicated to offices, such as Piata Presei Libere, Floreasca and Barbu Vacarescu, where infrastructure is very well developed. “The center will remain the place where it is always difficult to acquire land, difficult to build because of the stance of the mayor and urban regulations which are becoming increasingly assertive in relation to the old structure of the city,” adds Cernescu. In addition, there will be areas with many facilities, such as Semanatoarea, where developers can build several quality office buildings, as there is an underground train station nearby. This area

“Owners are still chasing illusory profits generated by a higher level of rent, and they do not realize that they are losing a lot of money every month” Mirela Raicu, partner with Esop Consulting

36 The Diplomat October 2011

attracts mainly information services. “And further north remains one of the most popular zones because of reduced traffic and parking availability, a healthy working environment, low noise and clean air,” say Willbrook representatives. In central and northern areas the occupancy rate of the buildings is above the market average, and demand is constantly increasing, so these areas have development potential for the next 6-12 months. Most consultants do not see an office building market in southern Bucharest. There are several reasons: infrastructure is less developed, the airport is in the north, the underground train station network does not reach everywhere and there are no industrial clusters to justify the number of offices. “The logic of office developments should follow the logic of industrial development,” explains Cernescu. While companies tend to base their head office in the central-northern area of the city, for back-office operations they go for large areas such as Dimitrie Pompei, which has a high concentration of this kind of space, and Sema Park. There has been less interest in Pipera spaces. “We expect that after the bridge is finished the Pipera area will be more crowded – the bridge will completely change this area – and we will have reduced rents for a location to which you can get access immediately, which is very advantageous,” adds Horatiu Florescu.

office market

“The crisis helps us because there are many companies coming to Romania and hiring new people, and this means that they need space” Horatiu Florescu, general director at The Advisers/Knight Frank

Market not saturated

“We lack modern offices; we lack modern industrial areas; we lack modern logistics and residential areas. I do not think we can speak of a saturated market,” says Cernescu. He adds that although Bucharest is not a regional hub for business like Prague or Bratislava, it is a city with more than 2.5 million inhabitants, and a place in which 50 percent of the country’s economic activity is concentrated. “I think when we reach 2 million sqm of office buildings we can say that we are at the upper limit. But it is a long time until then,” adds the Immorent head. Cernescu’s opinion is shared by Ciprian Glodeanu, who says that we cannot speak about market saturation because more and more big companies are moving in. “For example H&M have entered the market, we hear that Tesco will come, and all these companies need modern office space. Many of the offices that have been

built are beginning to reach their limits,” says Glodeanu. Indeed, in an older building a company does not have the same facilities as in a newly built block. And large companies tend to base themselves in modern buildings with many features. “In 2008 everyone was extremely cautious and did not want to do the work of constructing or opening new buildings, but this is natural. I see some signs of market recovery: it is new projects, area offices and retail real estate segments that are most active in this regard,” says Madalina Cojocaru. GTC dismisses talk of market saturation. The firm says that the Class A office market has remained largely the same, with no major changes. Looking into the near future the developer sees no reason for the stagnation since there are many office buildings of that kind and demand is growing.

Latest projects

20-30

percent is how much rents have decreased since mid-2008 announced for the Bucharest office market, the first stage of the Hermes Business Park Pipera office campus, which was greeted with reluctance at the time by many real estate consultants. Later Bog’Art and UniCredit signed a contract to build a 15-storey building at Piata Presei Libere, whose construction has moved rapidly this year: the steel structure was built, and by the end of the year it should be mounted with the front. In the spring of the next year the bank can move to its new headquarters. This year things have begun to move for other projects too – Raiffeisen Evolution and Strabag have put in the first pillars of Sky Tower, AFI Europe is working on a building near the Cotroceni Park mall, while Radu Dimofte also started work on a building on Aviators’ Boulevard, near

“When it comes to new projects very few companies are building speculatively because the banks have put restrictions on obtaining financing,” says Madalina Cojocaru. Currently, a company must have 30 percent of the building rented to receive co-financing and developers are building only when they have demand. “It’s a delicate problem because new projBicycle producer Eurosport ects need to borrow money from the DHS , racing to 14% growth bank and the banks On September 23 this year, Eurosport DHS invited to Bike Fest have raised the prea selection of the finest romanian bicycle retailers out of 600 lease level required to be rewarded with diplomas and prizes in bicycles for their to grant credit,” sales results. There were several meetings between traders and explains Mirela executives, on which occasion the novelties prepared for 2012 Raicu. were presented. And in a market According to Lucian Contraş - Sales Manager, Eurosport DHS where people are reported a 60 milion RON turnover on first quarter of 2011 meannot making longing a 14% increase compared to the same period last year. term plans even “We foresee a positive trend for Romanian market but mostly multinationals are we enjoyed export success. Market did not suffer from the crisis hesitant to launch because people see bicycles as eco-friendly, cost efficient alternasuch projects. tive of transportation. I think we are facing a shift in preferences According to the towards cycling, “said the sales manager. Esop representative, Eurosport DHS has invested more than 20 million euros if the vacancy rate becoming the largest manufacturer of bicycles in South East drops, Class A projEurope. Plant in Deva with over 300 employees has a monthly production capacity of 35,000 bicycles. Eurosport DHS brand grabs ects are more likely 75% of the market share in Romania while company’s products to start construcare exported to 17 countries in Europe. tion. Last year, only one new project was

office market the Leumi Bank headquarters. Later this year work could start on the Ana Tower project near the hotel Crowne Plaza and Floreasca Park, a building developed on land purchased by Portland Trust from businessman George Becali. “By the end of the year I think about 100,000 sqm will be finished, but this an optimistic scenario. It is realistic to think of about 50,000-60,000 sqm. Delays usually occur halfway through the development stage of the building,” said Raicu. In addition, more and more representatives of the housing market are relying on the recovery of the pre-lease segment. Before the crisis, on a market with few quality buildings, 80 percent of transactions were pre-lease. Then things changed and the number of pre-leases decreased significantly. But now it seems that this sub-segment is rebounding. For example, many IT companies want buildings in the west of the city, where a lot of projects have no vacancies, so these

New office building development projects in 2011 Swan Office Park Area: Pipera Developer/Owner: Chayton Investment: EUR 110 million Surface: 26,000 sqm Platinum Business Center Area: Baneasa Developer/Owner: Willbrook Investment: EUR 100 million Surface: 40,000 sqm Cathedral Plaza Area: Calea Victoriei Developer/Owner: Willbrook Management Investment: EUR 45 million Surface: 25,000 sqm Hermes Business Park Area: Pipera Developer/Owner: Atenor Group Investment: EUR 150 million Surface: 78,000 sqm AFI Business Park Area: Cotroceni Developer: AFI Europe Investment: EUR 25 million Surface: 75,000 sqm (SOURCE: Real estate companies)

38 The Diplomat October 2011

companies prefer to pre-lease spaces. For instance, if you want to rent 4,000 sqm in Sema Park at the moment there is no such space. Pre-leases are not at the same level as last year. “There was a time in 2009-2010 when this segment of the market was going very well as there were no spaces available. But now we have many spots available, so those who want to rent have a lot of choice,” says Madalina Cojocaru. According to a report by The Advisers/Knight Frank 40 percent fewer new office spaces will be delivered this year than in 2010. But we must not forget that in 2009 and 2010 no major projects on the office market were begun.

Large spaces for small companies

Lately, more and more small and medium companies are looking to rent office space in big office buildings. The main problem with this is that they demand very little space, about 100-150 sqm. “It is a problem to share a larger space. When you have a floor of 500 sqm it’s hard to divide it. But rather than have an empty office building it is better to try to share,” says Glodeanu, adding that his customers say it’s not advantageous to have small clients. ”The companies prefer one or two big tenants to lease 2,000-3,000 sqm each.” According to consulting company Colliers, most transactions this year involved small and medium firms. “Transactions made by small companies that rented between 100 and 300 sqm were much more common than those made by companies that rented over 3,000 sqm,” says Maria Florea, adding that office spaces must be prepared for these companies.

The future is bright

In the past few years the vacancy rate of office buildings in Bucharest was almost 20 percent, but it has declined slightly this year to 15 percent. Considering that no new significant deliveries have been announced for this year, the available space will continue to decrease. “But in Romania there are major companies that want to have a representative office. Instead of being divided into three, four spaces they will discuss it with a builder and will have a place to represent them built,” says the Wolf Theiss & Associate representative. Glodeanu expects things to go well in the coming period. Elsewhere, Willbrook representatives believe that even though no significant economic recovery is evident and the construction market is still flat, the office market is not saturated and next year will

“Transactions made by small firms that rented between 100 and 300 sqm were much more common than those which rented 3,000 sqm” Maria Florea, associate director at Colliers

bring the need for new office space on top of the construction projects from the last two years. “Although nothing happened in 2009 and in 2010, this year things are starting to happen in the real estate market. While in 2009 there were owners who wanted to sell because the market was paralyzed, now there is demand, and things are beginning to move. Not at the same speed at which they once moved, but they are moving,” says Cernescu, adding that the bad news is that nobody knows how long this process will take. Many consultants believe that the market depends on how the economy develops, and players need to see if there will be a second wave of the crisis or not. “In 2012 ‘caution’ will continue to be the watchword; people will still look closely at how much they’re paying and their monthly costs. I expect 2012 to be a year like 2011, without major changes,” predicts Mirela Raicu. ■

automotive event

After-sales market needs inspection How does the automotive aftermarket, worth about EUR 1 billion in Romania, relate to the after-sales and insurance sectors establishing themselves locally? What share of business do independent after-sales services make up within a monopoly-orientated market? And how do insurers get involved in this market and with what effect? Automotive Aftersales Power Breakfast organized by The Diplomat - Bucharest brought to the same table the top players in the industry in order to highlight the current challenges and opportunities of the sector. By Magda Purice and Roxana Cristea

he market of car parts and the aftersales segment in Romania face tough issues including protectionism, monopoly, fraud, greed, unfair competition and the unfair approach taken by insurance companies operating locally. However, as a market with large development potential, with the car aftermarket segment alone accounting for EUR 1 billion, these problems could find solutions if car importers, dealers, insurance companies and regulatory bodies worked together to the same economic rules. To facilitate such a result, top managers and key leaders in this segment representing both large companies and regulatory institutions sat around the same table at the Automotive After-sales Power Breakfast in order to engage in an open dialogue and outline development trends of this segment in Romania, aligned to other European markets.

40 The Diplomat October 2011

How free is the free automotive aftermarket in Romania?

Highly disputed by independent service providers and the official importersâ&#x20AC;&#x2122; and dealersâ&#x20AC;&#x2122; after-sales networks, the Romanian market seems to lack a clear legislative framework, while unfair monopolies affect the free flow of demand and supply, with the consumer being the most affected at the end of the day, when the bill comes.

Marius Constantinoiu, president of Augsburg International

On a market disputed by independent services providers and car producersâ&#x20AC;&#x2122; after-sales networks, the automotive aftermarket segment is marked by a certain protectionism that is visible both in Romania and other European countries. For instance, in Romania there is a monopoly involving Dacia and Renault

which forbids the sales of aftermarket car products for their car models, as Renault, Citroen and Peugeot do also in France. In the Czech Republic, it is the same situation with Skoda. This protectionism leads to an unhealthy monopoly economic effect on a free market, as there should be in Romania. In Germany for instance, the share disputed by independent service units and the official branded service shops of car producers and dealers is 50:50. Romania, unlike other European countries, seems to follow its own rules with aftermarket and after-sales services, including insurers dictating policies.

Zsolt Andrasy, general manager at Autonet

There are countries with no less than two servicing units belonging to a car dealer of the same brand located in cit-

EximBank: “Companies show increased interest towards our products” How is EximBank positioned on the finance-banking market at present?

EximBank is a specialized banking institution having a product portfolio built on three business segments - financing, guarantees, insurance and acting on both state name and account and own account. The activity on own account allows EximBank to offer products and services targeted at companies active on the Romanian market, in a similar manner to any other commercial bank. Under this category, EximBank offers investment credits, finances the current activity of the company or supports the companies that work with European funds. The diferentiator element for EximBank is the activity on the state name and account, which allows the bank to offer a specific range of products that are unique on the Romanian market. Under this category one can find the state guarantees – available to any company that wants to engage a credit from a commercial bank and does not posess enough guarantees, subsidized interest rate credits – interest rate which is lower by 5 points as compared to the market and remains fixed during the crediting period or the partial interest rate compensation that allows any company to recover 50% of the interest rate it has to pay for the investment credits granted in RON. I would like to emphasize an important aspect related to the perception regarding EximBank. For many years the bank has been seen as an institution working only with exporters and this is not entirely valid anymore. The market segmentation and the identification of the needs of new potential clients have determined a slight revision of the bank’s scope of work leading to the extension of the adresability of our products and services.

Which are the messages you receive from the economy for 2011?

Ionut Costea, President EximBank

Which business lines have been more successful lately? Which are the most wanted products now?

The bank registered good results on all its three business lines – financing, guarantess, insurance. These achievements are related to increased profitability of the bank’s activity as well as to the decrease by almost 20% of the costs as compared to the budget. The total exposure of the bank increased by 40% during first six months of 2011 as compared to the first semester of last year. Thus, the exposure on the own name and account increased by 36% as compared with the first six months of 2010 due to the financing activity whilst the activity on the state name and acocunt is 40% higher in the same period, mainly due to thte guarantees sector, that are now four times bigger than in 2008. These are also the most wanted products but I must observe that lately we registered an increased number of requests for financing current activity which is a very good indicator for the entire economy.

As I said, our current activity offers a lot of information about the dynamics of the business community in our country. For instance, we have noticed the good response of the Romanian exporters that are now trying to re-connect with partners outside European Union and to diversify their activity with companies all around the world in order to reduce their dependancy on the European markets and minimize the negative effects of the economic turmoil on their businesses. Romanian entrepreneurs understood quickly that they have to expand their portfolio with partners from non - EU states so that they can reduce the impact of the fluctuations form the Western European markets. EximBank has significantly improved its efforts to support the Romanian exporters and has engaged a constant communication process with the business community so that it can receive feed back regarding its actual needs. The business model the bank has implemented during last years is solid and effcient – more than 300 Millions lei profit during last two and a half years and this allows us to be confident and to encourage the Romanian companies to come looking for us and to start benefiting from our products and services in order to increase their economic performance.

automotive event

Marius Constantinoiu, president Augsburg International: On a market disputed by independent after-sales services providers and producers’ after-sales network, the aftermarket segment is marked by a certain protectionism that is visible both in Romania and other European countries

Zsolt Andrasy, general manager Autonet: Compared with other countries, Romania has a limited branded car service network. The consumer has to be able to choose freely between independent and branded service units, within a regulated market

Dudy Perry, CEO New Kopel Group: The Romanian market is currently facing the effects of past greed. With the consumer becoming more aware of and attentive to his or her expenses, but also looking for a fair price-quality ratio, the volume of clients who can afford after-sales services has fallen

ies with fewer than 100,000 inhabitants. It is natural for the Romanian consumer to choose to replace the different parts of the car in the neighborhood, and therefore to choose an independent service, rather than traveling hundreds of kilometers to the car producer’s official service unit.

ance company will send the customer only to certain service stations to have their cars repaired, without giving the choice where to go. Even more, insurance companies will impose the type of car parts that will be used in the car, sometimes not of the best quality.

the law, because this has already happened in our opinion, and we therefore notified the Competition Council and the Insurance Supervisory Commission to start an investigation.

Dudy Perry, CEO New Kopel Group

Marius Constantinoiu, president Ausburg International

Insurance companies, by their way of calculating the claim, give customers cash compensation paid in advance. I think this somehow eludes the law. In terms of smaller independent service units, there are many cases where no invoice is issued and therefore no tax is paid. We must be honest: it is an income and any income should be taxed. This competition, without the same base, can never be fair, I want to have competitors that are taxed and authorized by the Romanian Automobile Register (RAR). In addition, in Romania there are many service stations which, for example, say they have replaced the wing of a car and in fact they will only repair it, and the insurance company is defrauded. RAR should also inspect more often the small and independent service units, not only the large ones in order to make sure they function legally.

Before the economic turmoil, everyone on this car market enjoyed extremely high sales, especially of the branded spare parts sold in the official dealers service units. In the meantime, with the consumer becoming more aware of and attentive to expenses, but also looking for a fair price-quality ratio, the volume of clients who can afford those services has fallen. Most drivers are searching for independent car servicing units or even starting to improvise and to repair their cars themselves. What we’re seeing now is an adjustment of prices and increasing competition from independent car service networks.

Insurance – too intrusive in the car servicing process

One of the biggest problems faced by car dealers, independent car service chains and spare parts suppliers is the policy of the insurance companies. Companies are unhappy that insurers are trying to impose certain rules and market policies, considering it unfair competition and interference. The representatives of service shops and spare parts suppliers claim that the insur42 The Diplomat October 2011

In Romania, the client is not informed regarding the relationship between the insurer and the service unit. In other countries, the insurance system follows a logical and pragmatic path, as insurance companies do not have partnerships or agreements with the service units. In Romania, the situation is, unfortunately, different. The insurer forces the consumer to use a certain service station for vehicle inspections or repairs. The service station is also forced by the insurer to use a spare part with a certain brand for the consumer’s car. Ultimately, the losses are borne both by the service station and the consumer. Insurers, under Romanian legislation, are not allowed to get involved in the sale of parts, but indirectly they do.

Haralambie Stanciu, president of Car Parts Distributors Association in Romania (ADPAR)

Various issues have been raised regarding insurance companies and how they try to impose some rules on the automotive market. We need to get a clear picture of the insurance market and see where it violates

Danut-Marius Ene, service division manager at Radacini Group

Cristian Rudau, spare parts sales coordinator Mercedes Benz Romania

Unfortunately we also have problems with insurance companies in the sense that sometimes customers have to pay from their own pocket the bill and claim the money from

automotive event

Haralambie Stanciu, president of ADPAR: Regulation body should be respected and dynamic. Various issues have been raised regarding insurance companies and how they try to impose some rules on the automotive market.

Danut-Marius Ene, service division manager, Radacini Group: Insurance companies, by their way of calculating the claim, give customers cash compensation in advance. I think this somehow eludes the law.

Constantin Ionescu, executive director products certification value, Romanian Automobile Registry: We do not have statistics about the Romanian automotive black market but we know that our country has a very small accident rate due to technical failure.

the insurance later. As sometimes the bill is in the range of thousands of euros, this is impossible to be covered by some customers. Still, they can choose the desired new auto part for their cars as we have implemented three levels of spare parts choices.

no surprise that the local insurance players’ scene is rather unvarying regarding business policies.

are not taxed, leading to a big problem. For us, as dealers, we can’t compete on a market that is not healthy. This also affects the distributors of car parts because companies have to pay fees, salaries and taxes and this unfair competition is not good, neither for us, nor for them, as parts suppliers. Because there is no common position on the market, people who trade illegally have an advantage over the companies trading genuine parts.

Mihai T. Baltac, CEO Hofmann Autotech Romania

In recent years, insurers paid large sums of money to car services companies but today, we can see on the market exactly the opposite approach, insurers not willing to pay any more for anything. The effect is directly linked to the current economic trend. It is also a problem of prices locally. For instance, an inspection carried out in a German after-sales unit can cost less than half as much as in Romania. I have paid EUR 400 for an inspection in Germany while, in Romania, it would have cost me more than EUR 1,000.

Andras Lorincz, country manager Elit

Customers are not informed regarding the quality of the spare parts that should be used for their cars when it comes to an car service unit. The insurance systems in Romania have to comply with the market realities and play fair, both regarding the after-sales parts suppliers and the end user.

Sorin Iacob, EurotaxGlass GM

The business model used by insurance companies in Romania follows the general Polish pattern, with many insurers operating in Romania having Polish roots. Therefore, it is 44 The Diplomat October 2011

What about the black market? Everyone says not to worry about it…

The automotive black market is not a problem for dealers or suppliers because it doesn’t affect their business one way or another. For them, the real issue is the quality of spare parts rather than counterfeit or illegal selling practices.

Andras Lorincz, GM of ELIT Romania PAO

Regarding the car parts sold on the black market, some statistics show that in Europe, the market is about 0.5 percent. In Romania, the market is no higher than this and I do not think that it is a big problem for us. What is interesting is that consumers are not informed about the level of quality of the car parts that they should put in their cars. Consumers should be informed that there are several types of quality parts that are differentiated by price and consumers have the option to choose. Aftermarket parts are very good and can be compared to the original parts.

Danut-Marius Ene, service division director at Radacini Grup

A free and competitive market is beneficial for the client, but we have here a slightly more delicate problem. Some spare parts represent a threat, some pieces are sold at car fairs, others come from outside the European space so

Marius Constantinoiu, president with Augsburg International

We believe that counterfeit car parts are not a problem for us. The black market in Germany for example makes up one percent of the total market. Car parts that come via illegal channels are not necessarily a problem. Our market problems relate to the protectionism of some car manufacturers as for example we are not allowed to sell Dacia and Renault parts. We also have a similar situation in France where we are not allowed to sell Renault and Peugeot and with Skoda in the Czech Republic.

Constantin Ionescu, executive director products certification value at the Romanian Automobile Registry (RAR)

In terms of certification, the problems are slightly more complicated and therefore the subject of spare car parts is a very complicated one. We do not have statistics about the Romanian automotive black market but we know that our country has a very small accident rate due to technical failure. ■

germany

German firms march on despite crisis and red tape

The 18,000 firms with German capital present in Romania account for EUR 14.1 billion in trade and this year expect double-digit growth. H.E. Andreas von Mettenheim, the German ambassador to Bucharest, says Romania should stick to its target of joining the Euro and try to adopt German meticulousness when dealing with irregularities in public procurement procedures, corruption, overly bureaucratic procedures and legal uncertainty. Major German companies from retail, FMCG, finance and construction outlined to The Diplomat-Bucharest their investment strategies and reservations about doing business in Romania. By Dana Verdes and Magda Purice

hether in trade, retail, energy, finance or the automotive industry, Germany last year kept the title of Romania’s most important partner in export and import and its third most important partner for foreign direct investments (FDI) locally, with more than 18,000 companies with German capital registered in Romania at the end of 2010. “It is plain to see, our bilateral trade relations are not a one-way street,” H.E. Andreas von Mettenheim, the German Ambassador to Romania, told The Diplomat-Bucharest in an interview addressing the main priorities and features of the bilateral trade partnership between the two countries. Currently, the trade figures for the first half of this year indicate a strong increase in the bilateral trade volume, after, in 2010, Romania and Germany exchanged EUR 14.1 billion worth of goods. So far this year, Germany has exported to Romania goods worth EUR 4.15 billion, an 18.5 percent hike year on year, while Romanian exports to Germany have seen a rise of 28 percent.

“At EUR 3.92 billion worth, they are reaching almost the same level as German exports. German companies continue to show interest in Romania and a lot that are already established in the country are planning to expand their business,” said the German Ambassador.

Tearing down the Berlin Wall in the local business environment

Still, doing business in Romania poses different challenges for foreign investors and German companies are no exception. As the Ambassador underlines, “Foreign investors – and not only German ones – repeatedly raise the following issues: irregularities in public procurement procedures, corruption, overly bureaucratic procedures and legal uncertainty.”

In its quest to attract more investments in the local economy, Romania has some work to do to improve the background for “doing business”, such as putting in place a fully functional justice system with predictable and transparent jurisprudence and due execution of final judgments, which von Mettenheim considers one of the main priorities. “When making their decision to invest, investors tend to focus on the hard facts – the investment climate, business conditions, the legal framework and a stable political environment – more than on political declarations of intent. As long as the political framework does not influence those factors negatively, its impact on investment decisions should be negligible. There is no alternative to a liberal market economy,” the Ambassador stated. “We are counting on a strong Romanian voice when it comes to developing a vision of an even closer European Union. In this context I would like to emphasize that I am convinced that Romania should keep its target of joining the Euro.”

germany

“We are counting on a strong Romanian voice when it comes to developing a vision of an even closer European Union” H.E. Andreas von Mettenheim, the German Ambassador to Romania

Drees & Sommer changes portfolio of services to cope with crisis

Since 2005, when Drees & Sommer was established on the Romanian market, the company has carried out a series of large projects in the retail, industrial and residential and office segments of the local real estate scene. The firm has overseen construction works for residential projects in Bucharest including Lake View, South Pacific Sydney Residence, Ibiza Sol, Belvedere and Alia Inmobiliaria. Also, one of its most important office building schemes has been the project management of the Premium Point office building in Bucharest, developed by Premiumred Real Estate Development GmbH. Besides Bucharest, Drees & Sommer has been involved in the development of City Business Centre III in Timisoara. “This year, Drees & Sommer Romania has completed the Petrom rehabilitation of plot 3 and plot 4 and a big discount market in Vaslui,” said Marc Porath, managing director at Drees & Sommer Romania. He was appointed to head the firm in February 2010, replacing the former managing partner, Renate Kremer. According to company data, Drees & Sommer had projects worth EUR 3 million in 2009 and 2010, delivering services such as project management, site management, project monitoring, tenant management and technical due diligence (TDD). For this year, the company has increased

its project services portfolio, “in order to address the actual trends of the market”, Porath specifies. The Romanian subsidiary will supply locally technical economical consultancy, green building consultancy and process management. Regarding the business objectives for this year, Porath says the company will maintain the same turnover as in 2010, over EUR 1 million. “Last year, from our point of view and taking into account the situation on the market, it was a good year,” he says.

Fuchs Condimente in search of spicier purchasing power

The Romanian market is still developing in terms of variety, is extremely price-sensitive and still largely dependent on imports, according to Uwe-Jens Karl, GM of Fuchs Condimente, a German company established in Arges County, Southern Romania. Two years ago it opened a production facility in Curtea de Arges, following a EUR 12 million investment, since when Fuchs has started to export spices to Eastern European markets. From the firm’s experience of the Romanian consumer and the overall local market, retailers’ shelves mostly display imported products. “As our Romanian plant has been established mainly to supply the local market, our export sales are still small – we sell up to 10 percent of our factory’s output outside the country,” said Uwe-Jens Karl. “Even basic agricultural products on the shop shelf such as onion, garlic, paprika or flour will generally not be locally produced. Expenditure on consumer goods is well below Western standards due to low income levels. The economy segment is gaining share against the medium and premium price segments.” Fuchs Condimente Romania achieved last year a net sales value of EUR 12 million and this year’s target is a 10-12 percent hike. In Romania, the firm has 250 employees.

“This year, Drees & Sommer Romania has completed the Petrom rehabilitation of plot 3 and plot 4 and a big discount market in Vaslui” Marc Porath, managing director at Drees & Sommer Romania

46 The Diplomat October 2011

Heberger Constructii builds on recovering construction market

Claus Kegel, managing director at Heberger Constructii, counted a fourfold turnover increase in H1 of this year compared with the same period of 2010, a “very poor” year. The company’s year-on-year growth is estimated to increase four times too, or even exceed expectations, according to Kegel. Since the beginning of 2011, Heberger Constructii, part of German group Heberger Bau, has been involved in works on the extension of the Egger wood production factory in Radauti, and a turn-key extension of a production plant for an international automotive supplier in Bucharest’s Militari district. Also, the company is currently working on the refurbishment of the Iris Mall in Titan and recently signed a contract to replace the granite facade of the German Embassy building in Bucharest. “The market is obviously recovering. Let us hope that the recent turbulence on the international financial markets is not the start of a new financial crisis, and then I am sure that we can be optimistic that the 2011 trend will go on,” said Claus Kegel. The company registered a record turnover of EUR 65 million in 2008, which fell dramatically to EUR 23 million in 2009, before dipping further in 2010. Claus Kegel is hoping for a turnover of EUR 50 million in 2012 or soon after. The company currently has 26 employees, down from 38 in 2009.

germany Carpatcement Holding keeps an eye on infrastructure projects

In his new position as general manager of Carpatcement Holding – part of German HeidelbergCement – since January 2011, Florian Aldea said the company had managed to attain similar sales in H1 of this year to the same period of 2010 and is optimistic regarding future projects, especially as the infrastructure projects announced by the state have not yet started. “Following the big delays in the infrastructure projects, the volumes on this market have been sustained by individual projects and small clients,” Aldea states. The manager expects growth of 2-5 percent for the next year, but it depends directly on the launch of engineering construction and infrastructure projects. One challenge is the significant drop of demand for construction materials, due to the decreasing purchasing power of consumers. The lack of credit availability and the pressure on prices of construction materials, in order to compensate for the lack of demand, add up to a pretty gloomy scenario, although the construction market seems to be slightly picking up. In 12 years of operations on the

18,000 is the number of companies with German capital registered in Romania at the end of 2010

Romanian market, HeidelbergCement has invested over EUR 450 million. In 2008 and 2009, the company invested EUR 100 million in expansion works at its local production facilities, including a new cement mill in Fieni, a new clinker silo and modernization works for cement mills in Deva. The company also expanded its supply capacity at its plant in Bicaz, a project exceeding EUR 4 million and 40 percent financed by from European funds. In 2010, the firm, with its three divisions, Carpatcement Holding, Carpat Beton and Carpat Agregate, had a production capacity of 4.5 million tons per year and made EUR 8 million worth of investments in 2010.

Noerr looks at market segments with growth potential

This year, the corporate law firm Noerr is focusing on energy, taxes and litigation, but it is also keeping an eye on the insolvency market that has shown promising growth in recent years. “The premises for building a firmer insolvency framework in Romania are being created, with investors showing interest in different businesses and industry sectors. The current law and the economic context create the possibility of acquisitions, and investors can take over share capital in a distressed company and negotiate with creditors,” said Alexandru Ene, associated partner and head of the dispute resolution and litigation department at Noerr. Still, the lawyer admits that successful reorganizations are few. But in Bucharest, the number of reorganization files has risen by 40-50 percent since 2009, according to Noerr, a faster rate than the volume of insolvencies. “Insolvency is like a chess game and the practitioners are part of this game. The result must be a solution to rescue the business,” said Ene. Besides its advisory services for restructuring and insolvency issues, the company

Top legal expertise for the German community in Romania Which is the experience of Hategan with the German business community? Hategan: We have assisted for the past 7 years almost exclusively German speaking multinationals that have investment projects in Romania. Due to our main location in Timisoara, we concentrated our business in the western half of Romania, Transilvania and Banat, but in the past couple of years we have been more and more involved in projects outside of these regions. Our firm developed several legal practices that are linked to the main business interests of our clients starting with M&A and Corporate Commercial, Banking Finance, Real Estate, Energy (especially renewable energy, a field of industry where German clients are very active), Insolvency and Labour. In these fields we assist German companies using the most diverse legal mechanisms, including structures that are “borrowed” from the German system of law and should be implemented here. In this respect, the theoretical and practical experience gained by me but also by

market in Bucharest. That is why we try to overcome this disadvantage by being very active on a national level, and covering more that the small Timis region with our services. And we were glad to be approached also by companies located in Bucharest or which moved from Timisoara to Bucharest, and changed As a strongly established regional law firm, the location but not the lawyers that they are working with. We were very which are your competitive advantages proud and appreciate this very much. in the Western part of Romania? Hategan: We have competitive Can you give us some examples advantages, but also disadvantages. of significant deals you worked Among the advantages we may on for German firms? emphasize the costs, we have Hategan: In the past couple of years we significantly more reduced costs, and worked on several deals and transactions this enables us to be more competitive that are worth mentioning. We assist an in our fees. We are able to recruit in Austrian group at all acquisitions of forest Timisoara German speaking lawyers. land throughout Romania. We assisted We have currently 11 German speaking attorneys in our team. As to the location, a German company that bought another player in the automotive industry with all we are closer to our clients, which have the local formalities of implementation a business interest in Transilvania and Banat. The most important disadvantage of the transaction. We assisted an Austrian Bank in optimising the credit is in the dynamism of the market. The agreement to improve the system of regional market is less dynamic that the other colleagues of our team in Germany and Austria proved to be very useful in understanding the business concepts and interests of our German clients. We like very much working with German clients, as we are able to connect with them and deliver exactly what they need.

guarantees. We assist a major German leasing company in the restructuring of portfolio of around 30 Mio Eur in Romania. We represent a large German group in the agricultural field which is active in the western region. We assist a German wind developer for a Wind farm in Romania. We set a compliance center for two of the largest German retailers operating on the Romanian market. We are confident that we can continue the same path that we enjoy working on so much, to the benefit of our clients.

11 Ady Endre street, 300175, Timisoara, Timis, Romania Tel: 0040-256.430.454, Fax: 0040-256.436.516 e-mail: ioana.hategan@hategan.ro, Web: www.hategan.ro

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“We now have a new warehouse of 1,200 sqm that allows us to have raw materials in stock for urgent orders, an EUR 4 million investment,” Eberhart Raducanu, general manager at Doehler Romania

gains turnover from corporate and M&A, dispute resolution, litigation, tax and financial advisory services. For this year, the company is taking a steady approach to growth expectations and believes that the market will keep the same trend as in 2010. Noerr runs offices in Bucharest, Sibiu and Timisoara. So far, it advises major German and Austrian construction and engineering companies on public procurement tenders. One of the company’s projects was to advise the international construction group Bilfinger Berger on tendering and litigation issues regarding various public procurement procedures. Major clients include Premium Aerotec, Baumax, Lidl, Bosch Group, Egger Romania and Rohde & Schwarz.

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 some EUR 70,000, of which Miele paid about 40 percent. Also in Brasov, Miele invested EUR 24 million in developing a production unit for electronic components. “We’re also talking about opening a shop in Iasi,” adds Popescu. The company entered the local market in 2007, when it opened an electronic component plant in Brasov and a showroom and service point in Otopeni, Ilfov County.

Miele bets on luxury home appliances

Beiersdorf Romania enjoys double-digit market share on local cosmetics segment

The biggest luxury home appliance maker worldwide attained a turnover of EUR 2 million on the Romanian market in 2010, with the recession not impacting the company’s bottom line. “The crisis has had absolutely no effect on the Romanian business, and from the worldwide 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. 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

Beiersdorf Romania, which has been importing Nivea skincare products and Eucerin cosmetics to the local market since 2000, is the only player on the local skincare products scene to have a two-digit market share in this industry, at 16 percent, according to Erik Hageleit, general manager of Beiersdorf Romania. He said, “The company’s best sellers are those with a strong skin and face care expertise such as after shave balms and Nivea creams, since Romania, like many other Eastern European countries, can be described as a beauty-orientated market.” The biggest challenge in Romania for the German company, but also an opportunity for development worth exploring, is the low penetration of products – not only cosmetics – in rural areas, which represents almost half of the potential consumer base in Romania. With an estimated total cosmetics market worth EUR 500 million, Romania ranks in the top three CEE countries by sales for Beiersdorf. Still, the 20-30 percent growth registered on the local cosmetics market from 2007 to 2008

might not be seen again very soon. For this year, the company estimates sales of EUR 40 million. “Due to the delay in facing the effects of the crisis in Romania, the decrease in purchasing power was only felt in 2010,” said Erik Hageleit. Beiersdorf currently has 70 employees in Romania.

DHL International Romania consolidates local operations

DHL International Romania has started to consolidate its local operations by taking several strategic measures since the beginning of the year. “At the beginning of this year we launched a new cargo airplane, operating in the western part of the country, and a new operational gateway in Cluj. Business is up 48 percent in terms of revenue in the region,” Gian Sharp, general manager of DHL International Romania, tells The Diplomat-Bucharest. According to him, the new DHL airplane has an efficient flight schedule which allows a longer time for the pick-up of international shipments with same day departure, while the new gateway can process a higher volume of shipments and offer better customs services. The company reported a turnover of EUR 36.1 million last year, a 12 percent hike on 2009’s results. It currently has a headcount of 400. Sharp stated that DHL International Romania’s plans for this year mainly include

“Following the big delays in infrastructure projects, volumes on this market have been sustained by individual projects and small clients” Florian Aldea, general manager of Carpatcement Holding

48 The Diplomat October 2011

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germany

“The premises for building an insolvency framework are being created, with investors showing interest in different businesses” Alexandru Ene, associated partner at Noerr

operational investments for improving transit times and cut-offs, these being the most sensitive elements for the firm’s customers when choosing an express courier delivery partner. “The reengineering of our sorting line at the Otopeni gateway will reduce the processing time for inbound shipments by 30 minutes, which means our customers will receive their shipments earlier every day,” said Sharp. At the same time, DHL International Romania will this year make a EUR 2 million investment in new shelved vehicles in order to improve productivity and offer the best pick-up and delivery times for its customers. “There is a tender at the moment. It will be probably Mercedes or Volkswagen,” said Sharp. For 2012 DHL is planning other operational investments by using a new aircraft in Bucharest to significantly improve cut-offs in the capital and in east of the country. Also for next year, the firm is considering investing in a larger terminal which will incorporate domestic operations. “We are currently assessing what offers are out there and we have to keep in mind the airport’s plans. We are looking for a 10,000sqm surface area, around a 2,000-sqm office area and 5,000-sqm warehouse area. So far this year we are 14.8 percent up on shipments and about 10 percent up on revenues,” added Sharp.

Lufthansa sees demand taking off again

German airline Lufthansa started its operations in Romania 44 years ago with flights from Germany via the former Yugoslavia to Baneasa. Now the group operates almost 200 flights per week, connecting Romania to the world via Duesseldorf, Frankfurt, Munich, Vienna and Zurich. However, after almost half a century, “We still have to fight bureaucracy and an increasing number of fees,“ Stefan Versemann, Lufthansa general manager for Romania & Moldova, tells The Diplomat-Bucharest. According to him, in the last five years the company has opened hubs in Sibiu, Cluj and Chisinau in the Republic of Moldova and increased the number of flights and seats from all origins rapidly. Regarding the impact of the crisis on the company’s results on the local market, Versemann said demand was coming back and the company‘s clients can use the synergies within the Lufthansa Group. “For example flying out early morning via one of our hubs to northern Europe and being able to return late at night by flying back via another one, no accommodation is needed. We can see it clearly in our figures. This year’s inauguration of the night-stops in Timisoara and Cluj is very successful as our clients make use of this offer and save money,” said Versemann.

Continental rolls out cost efficiency and output hiking measures

German tire producer Continental told The Diplomat-Bucharest that this year it is continuing its development strategy for its Romanian operations, by recruiting the best people, and further investing in new facilities to develop and manufacture high-quality products for the automotive industry. “Continental currently has 10,000 employees in Romania. This year we will

continue to recruit in Timisoara, Sibiu, Iasi, Brasov, Carei and Nadab, both for engineering and production employees, according to the specific needs of each facility,” company officials tell The Diplomat-Bucharest. Concerning the production volume, Continental Tires Timisoara currently holds third place among the group’s tire plants. The factory in Timisoara is also one of the biggest exporters in Romania, with approximately 80 percent of its production going abroad. “With over 100 million tires produced, including Ultra High Performance tires, the strategy of our company is focused on cost efficiency and increasing the output of high added value products,” say representatives. By the end of 2009, Continental had invested over EUR 400 million in its Romanian operations. Last year, Continental Tires Timisoara started a EUR 50 million investment in a master batch production area, for processing raw materials, bringing the total amount invested by the firm in Timisoara to over EUR 220 million. At the same time, the number of the company’s employees has increased from 200 in 2000, to more than 1,600. Company officials say that the mandatory measure to equip cars with winter tires could boost local sales for the winter tire segment which has registered a constant increase for Continental.

“We will make a EUR 2 million investment this year in new shelved vehicles in order to improve productivity” Gian Sharp, general manager of DHL International Romania

50 The Diplomat October 2011

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20 Years in Romania

germany

“Our expansion has been slowed because of the anachronistic demands of developers. But our intention is to continue expanding” Romano Quinzi, country manager at Obi Romania

negotiating another regular contract worth over EUR 1 million. This year, the company targets subscribed premiums of EUR 11 million, five times more than last year’s results, as he considers the need for good medical services universal. Despite the rough start, the company has the chance to up its speed on a healthcare market growing at over 30 percent and above.

Signal Iduna ensures growth with large health insurance contract

The German company’s operations started on the local market towards the beginning of the crisis, which made for a slow start. “We began to go operational at the end of 2008, not exactly the best time. We were taken completely by surprise, just like everybody else, by the recession. We didn’t put full force behind the opening, but immediately backtracked into some investments that we had to do then, like setting up the sales forces in a larger way,” Leslie Breer, president of the management board of Signal Iduna Asigurari de Viata, tells The Diplomat-Bucharest. Despite the slow start the company has solid investment plans for the local market. “We have a capital inflow of EUR 12 million which we have boosted in the meantime with an additional EUR 3 million, and we are planning our next capital inflow for the end of this year, another EUR 3 million,” he added. In predicting the investment return, Breer is realistic. “In a few years, the investment will show. Insurance companies take a longer time to break-even but then again we are in the long-term business.” Breer’s expectations are confirmed also by this year’s results. “This year we managed to ink the largest health insurance contract with automotive supplier Takata Petri, a company with headquarters in Arad,” said Breer, adding that the insurer is currently

PCC SE’s epic fight for Oltchim

German group PCC SE has been present on the Romanian market since May 2007, when it became shareholder at Oltchim. Since then the company has engaged in a tough process of becoming the majority shareholder of the company. “Since the very beginning PCC SE has expressed its interest in participating in an open and transparent privatization process of Oltchim in order to acquire the company and make it generate profit,” Wojciech Zaremba, PCC SE representative in Romania, told The Diplomat-Bucharest. “The PCC plans include developing Oltchim based on new and modern technologies and reorienting its product portfolio towards specialized niche products with high profit margins, measures which would allow Oltchim to become competitive and develop in this increasingly tough market.” Currently, PCC holds an 18.2 percent stake in Oltchim and 60 percent in Euro Urethane, a joint venture company with Oltchim. The Euro Urethane investments alone amount to EUR 10 million, in addition to the current stake held in Oltchim, says the company. “The main difficulty for us in Romania is the lack of dialogue with the current management of Oltchim, with whom we have strong disagreements regarding both strategy and vision. We are very concerned that if the current path of accumulating debts and losses continues, which has seemed to be the policy of the current management for at least six years now, Oltchim will be almost impos-

“ I believe in the forecast that the pharmaceutical market in Romania will be the fifth largest in Central & Eastern Europe in five years” Renato Keller, country manager at Bayer Pharmaceuticals

52 The Diplomat October 2011

sible to turn around,” says Zaremba. “We have a business strategy and solutions to save Oltchim from its current dire financial situation, but they must be implemented as soon as possible. Any delay in the privatization process and the company’s restructuring means a lost chance for Oltchim’s recovery.”

Doehler Romania mixes market with innovative products

Doehler, a global producer, marketer and provider of technology-based natural ingredients, ingredient systems and integrated solutions for the food and beverage industry, first pitched its flag in Romania in 1996. The company’s future plans for the local market focus on innovating concepts. “These concepts are very successful on Western European markets such as Germany, or for instance in Poland, and we hope that very soon our consumers will accept them as well. When I’m talking about innovating concepts I mean: still drinks with more juice content (20%) and fruit pieces inside, juice energy drinks, beermix and malt drinks, aqua fruit and flavored water and soft drinks with Stevia (a natural sweetener). I believe that innovation is a tool for a crisis period,” Eberhart Raducanu, general manager at Doehler Romania, tells The Diplomat-Bucharest. In November last year the company completed a EUR 4 million investment in a new location. “This represents the future for us. We built a new office with storage and ser-

germany

“The difficulty for us in Romania is the lack of dialogue with the current management of Oltchim, with whom we have strong disagreements” Wojciech Zaremba, PCC SE representative in Romania

total turnover decreased by 5 percent to EUR 290 million in 2010. However, we continued investing in the store network and raised it from 43 to 55 stores – this is highest organic growth in Billa Romania’s history so far,” said Tinkler. According to her, the firm’s number of employees rose to 3,166 in 2010. “The economic crisis is still having some effects on the development of Romania – it’s obvious that local consumers still have lower purchasing power. However, we expect consumption to start to recover again. We are convinced that Romania still offers a lot of potential – therefore we will stick to our expansion strategy,” concluded the German official.

vice possibilities for our customers. We now have a new warehouse of 1,200 sqm (400 sq. storage, 800 sq. cooling storage) that allows us to have raw materials in stock for urgent orders, and also an Application and Sensory & Obi Romania rolls Consumer Science Centers were we can make up its sleeves our own sample based on client’s request” “Obi opened its first Do-It-Yourself (DIY) added Raducanu. stores in Romania in November 2008, exactly when the crisis started to be felt. This was Billa Romania has one of the major issues preventing us from expanding in the desired rhythm and accordeye on expansion “Romania is a very important market for Rewe ing to our initial plans,” Romano Quinzi, International. We have never changed our country manager at Obi Romania, told The strategy regarding our expansion plans due Diplomat-Bucharest. to the economic situation. Therefore we’ll “Our expansion has also been slowed keep on investing in Rewe Group’s interna- because of the government’s anti-crisis decisions taken during last year, but especially tional business and we will further increase by the anachronistic demands coming from our market position in the future,” Corinna Tinkler, corporate spokesperson and director developers. However, our intention is to of the corporate communications department continue expanding where offers prove to of Rewe International, told The Diplomat- be interesting.” Bucharest of the group’s focus on Billa RomaDespite the crisis, Obi Romania’s staff nia. On the local market Rewe International count hasn’t varied widely, currently numcontrols companies such as Billa, Selgros and bering 650. Quinzi said that the company the Penny store chain. The German company currently has about 300 suppliers, of whom has invested several millions of euro so far in almost 80 percent are local suppliers. Accordthe local market. Billa Romania’s current mar- ing to him, for each opened store the company ket share in the food trade segment amounts has invested about EUR 5 million, and its to 4 percent and development plans are made registered capital reaches RON 207 million. at the German headquarters. Signs of recovery are slow, says Quinzi. “Against the background that Romania “H1 of this year was affected by a shortage is still facing a low purchasing power and of clients, but especially by the decrease in additionally has been confronted with a VAT average spending. This trend was maintained rise of 5 percent to 24 percent, Billa Romania’s until the end of July, when there was a slight

recovery. However, our view is that it will take a minimum of three years until the economy reaches the pre-crisis levels,” predicts the Obi Romania country manager.

Bayer sees Romania the fifth largest market in CEE in five years

The head of the newly formed Bayer country group Romania/Bulgaria, Renato Keller also manages the country division of Bayer Pharmaceuticals. The manager outlined for The Diplomat-Bucharest the company’s plans for Romania, as a strong market for Bayer divisions. “Concerning the local pharmaceutical market I think there are a lot of opportunities and Romania has taken the right direction in order to exploit them. I strongly believe in the forecast that the pharmaceutical market in Romania will be the fifth largest in Central & Eastern Europe in five years,” said Keller. Last year, Bayer increased its investments in the area by 11.2 percent, reaching more than EUR 3 billion for 2010, according to the representative. As a down point in the region, the manager cites the tax rates, which he feels are too high, and believes that there is room for improvement in the administration. “It is not competitive at all to have such a huge administration and to be obliged to fill in 10 to 20 forms for every single step,” he specifies. In Romania, the firm operates the three divisions, Bayer HealthCare, CropScience and MaterialScience. ■

“Even basic agricultural products on the shop shelf such as onion, garlic, paprika or flour will generally not be locally produced” Uwe-Jens Karl, Fuchs Condimente GM

3D ket growth in the second half of the year amid the increasingly rich offer of content,” said Irinel Burloiu, marketing manager at eMag. High interest was recorded on the 3D monitor segment used by gamers, as well as 3D projectors. “We estimate that the higher interest will continue this year, particularly as prices of devices have fallen and more diversified content is available: games, movies, and usergenerated content. While in 2010 we saw an increase in the display segment (monitors and TVs), 2011 shifts the focus to content,” said Dragos Salamac, team leader at BenQ for Romania. According to him, 3D projector sales in H1 this year account for 50 percent of total BenQ sales on the local market and this share is expected to grow to over 60 percent by the end of this year. “We expect an upward trend also on the monitor segment, with the increasing number of video games available.”

On-trend clients

Tech-savvy users say three cheers for 3D With 3D products and content now becoming mass market, the local 3D scene is gaining a new dimension. By Dana Verdes

he experience of watching, in 3D, the story of space shuttle Atlantis’s last mission, made in July this year, opens new horizons for any skeptic of new technologies. 3D products, whether we are talking about TVs, projectors or cameras, represent a new level of experience for users. Today’s PC manufacturers and game developers deliver the best 3D PC experience ever available. A 3D PC can fundamentally change the way you interact with digital content. Imagine playing over 500 existing PC games, watching 3D Blu-ray movies, taking your own photographs, or catching the latest sporting event streamed online, all in HD stereoscopic 3D. “3D technology is the most important moment in the evolution of home entertainment. Romania was one of the first countries where the technology was showcased, in November 2008, and ever since then the 3D market has grown significantly, both in terms

54 The Diplomat October 2011

of equipment and sales,” Cristi Stroe, Nvidia sales manager for South East Europe, told The Diplomat-Bucharest. The market flourished: as 3D products have become mass market, the prices of 3D displays are no longer prohibitive, said Stroe. Moreover, Tomohiro Nakashima, country manager at Sony, told The Diplomat-Bucharest, “Prices have fallen by a half so far and we are expecting them to go even lower.”

Diversification

The first products launched on the 3D market were PCs, also the first to have access to an extensive content base through online games and 3D movies, followed by compatible TVs. “In this respect, over 500 3D compatible games are currently available and the TV offer is continuously growing, supported by operators that intend to introduce 3D channels. We expect a significant mar-

Market players talk of a well-determined profile for the 3D client. “3D technology consumers are young users, well informed and passionate about technology and new ways of development,” says Burloiu. Moreover, Sony’s country manager says the Romanian 3D TV buyer is a user interested in investing in products that are reliable, is keen on technology and on being in touch with the latest trends, without making compromises regarding price versus quality. “Moreover, our customers pay attention to the design detail which should reflect the latest trends, because our public is interested in adopting the latest technologies,” said Nakashima. According to him, Sony Center has nine stores, with the most recent being opened in August in Timisoara. The average investment in a store starts from EUR 100,000.

3D market continues to soar

“3D technology has already revolutionized cinema and is completely changing the home entertainment industry, both by diversifying the product range and content. The 3D technology market evolved at a rapid pace in the second half of last year, and has honed consumer appetite for a new form of entertainment,” said Burloiu. Official data show that this year the 3D technology segment made a big splash both worldwide and in Romania. “In this context, we can say that interest for 3D will continue this year. Most likely, in Romania we can expect a volume at least three times higher than in 2010,” said Ciprian Hatneanu, director at GfK Retail and Technology Romania. ■

business leader

Banker gets new lease of life After four years at the helm of Immorent, Bogdan Cernescu notched up substantial financial results in the years before the crisis hit, but has also had to find ways to fight the economic downturn and keep the company afloat. He told The DiplomatBucharest that the recession had taught developers to think long term, and that he believes speculative investments will no longer find a place in Romania. By Roxana Cristea

“I

graduated from the Faculty of Finance and Banking during the 1998 crisis and I did not have many opportunities,” said Bogdan Cernescu, general manager of Immorent Romania, looking back to the time when he was searching for a job. He wanted to work in a livelier field than banking and, at that time, leasing was a new scene, one that quickly caught on in emerging markets, where the banking sector was underdeveloped and banks unwilling to lend. “That is an area where you can grow, plus I could learn a lot of new things. And then I made the choice. I read in a newspaper that three investment funds had acquired a majority stake in Motor Active and I sent an email. I was accepted and so I came to work in the leasing field.” After two years of leasing, Cernescu served as commercial director at BRD Sogelease and tried to develop his own business. Four years ago he took on the Immorent general manager position. The company, owned by Austrian group Erste, entered the local market in 2004 with its leasing division, Immorent

56 The Diplomat October 2011

Romania IFN. It subsequently developed and today is active in domains like project development, construction and leasing services. “When the group comes into a country, it brings all three lines. But they have a different life cycle. We start with leasing. And, as the business begins to take shape, we move into riskier areas such as project development,” said Cernescu.

Immorent lesson

Unlike his previous experience, the position at Immorent meant more than just management for Cernescu. “We know how to finance, how to

million euro are the yearly revenues Immorent reported before the crisis

build, and how to evaluate, develop, and sell properties,” he said, summing up his duties at the company. The Immorent chief added that the pivotal moments in his career were when he had to change activity. “Deciding to leave the banking system and work as independent consultant was very interesting. I think it was the most difficult period of my career,” he commented. His ethos is that when you try your luck alone you learn a lot about yourself. “And you wake up in the morning and have to give all you can and do your best because you depend on the success of that business,” says the entrepreneur. There came a time when he had to decide whether to hire people or remain independent. In the end he opted to return to the banking system, where he experienced both highs and lows.

Good times, bad times

“The best time at Immorent was when the sales volume increased. 2008, for instance, was a very good year in terms of business. This year was a good year

business leader too because we have begun to reap what we’ve sowed in the last two years,” said Cernescu. During this period the company has managed to keep its number of employees, and did not have to make redundancies. “I can say we have had a constant evolution,” said Cernescu. According to him, since the second half of 2008 the company has stayed on an even keel even though business was much lower than before. “I think we made about EUR 25 million per year. The crisis has further strengthened us. We used to seek only to increase our portfolio, and we have had to adapt and learn other things like how to manage clients and accept that certain areas will have losses,” added the businessman. While 2009 was a difficult year with many shocks and much bad news, in 2010 things were a little more settled.

New focus

The crisis also brought many changes for the firm, which has given up on development and not purchased land. But the interest in new acquisitions has increased this year.

“We wanted to make a deal early this year but, in the meantime, the owners changed their mind,” said Cernescu. The firm also plans to focus on new segments, such as the residential sector. “We are doing homework related to the residential sector. We are making a projection of what is happening now and what might happen in the next five to ten years in this area. In addition, we are looking to see to what extent further industrial development makes sense,” concluded the head of Immorent.

Future plans

This year the company hopes to stay at the same level as last year. Although there was little activity in 2009 and in 2010, this year things are beginning to happen on the real estate market. First of all, land prices are lower. “It’s worth buying land and starting to develop it in one form or another. And that’s good news. Moreover there is activity in the market,” said Cernescu. In his opinion, Romania needs new office buildings and industrial space. “It is important that developers have a long-

Who is Bogdan Cernescu? A graduate of the Academy of Economic Sciences in Bucharest, he has significant experience in banking and financial services with a core focus on sales, asset-based finance, corporate finance and real estate. In January he was appointed co-head of the Romanian arm of Erste Group Immorent, after taking over the managing director position at Immorent in Romania in mid 2007. Prior to that he held various position at banks and leasing companies, the most recent one (2005-2007) being Commercial Director of BRD Sogelease. term vision. Speculative investments will no longer find a place in Romania. This is the concept on which Immorent is based. We do not want overnight gains,” added the Immorent chief. “In the future I want to do something that is related to real estate.” ■

real estate Continental Hotels and GED plan 10 new hotels

Romanian businessman Radu Enache, the majority shareholder of the Continental Hotels chain, plans to develop ten new two-star hotels over the coming years, as part of an expansion strategy drafted with Spanish private equity company GED. The fund owns a 30 percent share of the Continental chain. As the hotel group has a credit exposure of EUR 35 million, Enache plans to recover some of the debts by selling several land plots. Recently, GED acquired 30 percent of shares owned by PPF Partners capital management fund in the 14-property Continental Hotels chain.

Cora to borrow EUR 210 mln from EBRD to expand in Romania

French retailer Cora, owned by Louis Delhaize Group, to borrow EUR 210 million from the European Bank for Reconstruction and Development (EBRD) in order to expand in several Romanian cities, following a total investment of EUR 397 million. The locations for expansion might include Bacau, Brasov, Constanta and regions around Bucharest, where the retailer owns plots. So far, Cora has seven hypermarkets countrywide and the management’s strategy targets coverage of most Romanian counties in the next eight years.

Argo Real Estate fund acquires Era commercial parks in Oradea and Iasi

The board of Argo Real Estate Opportunities Fund (AREOF), listed on the London Stock Exchange, has approved the purchase of the Era commercial parks developed by the Cypriot company Omilos in Oradea and Iasi. Following the transaction, AREOF becomes the largest owner of commercial parks in Romania, with properties like Shopping City Sibiu and Shopping City Suceava. In total, the fund will own commercial areas of more than 210,000 sqm within the four parks. Another big owner of commercial parks in Romania is Iulian Dascalu, with properties totaling 175,000 sqm from malls in Iasi, Cluj, Timisoara and Suceava.

58 The Diplomat October 2011

Gabriel Popoviciu plans EUR 80 million of further investment in Baneasa Romanian businessman Gabriel Popoviciu, the developer and owner of the Baneasa project in north Bucharest, plans to invest around EUR 80 mln in the next four years. The investment will mainly target the commercial area of the complex, to where the businessman plans to move restaurants and develop a leisure area and luxury-brand commercial space. According to Popoviciu, the new space that will host the restaurants will be 10,000 sqm and is part of a development stage to start this year and be completed in 2013. By 2015 at the lat-

est, the businessman plans to launch other extensions between Baneasa Shopping City and Ikea, according to representatives of Baneasa Developments, the company managing the commercial area of the Baneasa project. Recently, a EUR 19 mln cinema was opened inside Baneasa Shopping City. The cinema complex, Grand Cinema Digiplex, has an area of 14,000 sqm and 13 cinema halls, and joins the shopping, leisure area and food court at the mall, which currently attracts over 18 million visitors yearly. ■

Seven mall openings slated for this year After three years of inactivity on the large commercial real estate segment and five malls suffering construction and delivery delays, developers now seem to be upping the tempo and have announced seven new mall projects for this year. The overall sum to be invested in these projects is estimated at around EUR 500 million and the surface area 300,000 sqm. Cities where developers have announced openings are Arad, Oradea, Craiova, Constanta, Botosani and Bucharest. The capital is slated to have a new mall in the Chitila area, where investments in the EUR 350 million Colloseum retail park project are ongoing. The project is owned by Nova Imobiliare, a company controlled by Greek businessman Panico Panayi. Elsewhere, the Electroputere platform in Craiova, the city’s first mall, will be launched by yearend, according to the developer. The EUR 100 million facility is being developed by Belgian firm K&S Developments. On completion, it will deliver 71,000 sqm, hosting retailers such as Auchan, Decathlon, Inditex, H&M, C&A, New Yorker, Elvila and Altex. Also,

Arad and Oradea have Galleria, developed by GTC, and Oradea Shopping City, developed by Gabriel Popoviciu, as new mall openings scheduled for this year. Galleria, which is set to open this month, will host retail brands such as Cora, Flanco, Inditex, Mango, Pure Fitness and Cinema City. Also this month, Maritimo mall in Constanta, developed by the Austrian group Immofinanz, is scheduled for opening, delivering 50,000 sqm and names such as Auchan, Zara, H&M, C&A, New Yorker and Peek & Cloppenburg. Later in November, Botosani will see the opening of European Retail Park, comprising a 9,500-sqm Carrefour unit and commercial gallery of 5,500 sqm, hosting Domo, New Yorker, Leonardo and Orsay. ■

State-owned hotels might be put up for sale Minister of Regional Development and Tourism Elena Udrea has said she would like the hotels owned by the State Protocol Patrimony Administration (RAAPPS) to be put up for sale. As many of these hotels lie in a neglected state of business and construction, such as Bradu in Covasna and Triumf in Bucharest, the best solution would be

selling to investors, said Udrea. The Ministry added that such hotels were a source of income only for their temporary managers. According to Udrea, the sale must be part of a public auction at national or international level. The Ministry also said that the courtesy villas owned by RAAPPS should be acquired by private investors. ■

real estate National Company of Motorways and National Roads may get EUR 1.8 billion for projects The Ministry of Transportation has announced it will ask the Government to increase the budget assigned to the Romanian National Company of Motorways and National Roads (CNADNR) by 26 percent, to reach some RON 7.6 billion. According to a bill drafted by the Ministry, the projects targeted for financing are the two highway projects, Transylvania and Bucharest-Ploiesti. At the same time, according to the letter of intent signed with the IMF, the CNADNR budget has been boosted by EUR 8.3 million for the extension of the road tax informatics system in Romania. As a result, the company will have revenues of RON 1.6 billion this year, while expenses could reach a similar sum, slightly up on

the previous estimates of RON 1.59 billion. Last month, the Romanian Government carried out its first budget adjustment of the year, with more money being awarded to the Ministry of Transport and Ministry of Agriculture. The sums were allocated in response to positive news from the economy, with a 1.5 percent increase estimated for this year. The general consolidated budget execution is RON 11.3 billion, representing 2.07 percent of GDP, below the RON 12.6 billion limit agreed with the International Monetary Fund, World Bank and European Commission. The Ministry of Transport received an additional RON 1.69 billion, while the Ministry of Agriculture was given RON 910 million. ■

Buildings should be taxed according to use, investors say

City Mall finds six suitors for direct negotiations

Casa de Insolventa Transilvania (CITR), the legal liquidator of Bucharest-based City Mall, has announced that six investors have expressed their interest in direct negotiations for the sales procedure for City Mall. After five failed attempts auction off the facility, it is now valued at EUR 21 mln. The mall’s main creditor is Unicredit Bank, which has an exposure of about EUR 30 mln to the current owner of the mall, the Australian property fund APN European Retail Trust.

Mircea Dinescu sells agriculture company and 800 ha of land to Turkish investor

Romanian businessman Mircea Dinescu, who has various investment projects in Romania, has sold his company Agroindustriala Giubega, which controls 800 hectares of agricultural land in Dolj county, to a Turkish investor. The firm that acquired Dinescu’s land is Alcaruma Agro Consult. According to the Romanian businessman, the sale is part of his strategy to focus on other business endeavors such as tourism, vineyards and small agriculture, instead of larger projects like the one managed by Agroindustriala Giubega. Alcaruma Agro Consult is owned by Gorkem Yucel Tursucu, who holds almost 96 percent of shares.

West Gate Studios in Militari launches 275unit building on private student campus Private foreign investors believe that real estate constructions should be taxed according to their use – residential, commercial or industrial – and not in the current manner, based on the type of owner – private investor or company. Investors have also branded the decision to raises taxes for companies that do not re-evaluate the buildings in their portfolio ridiculous, given the current state of the market. According to lawyer Gabriel Biris, the current building taxation regime “creates confusion and competition distortions between legal representatives such as companies and private investors, since the taxation may be 100 times higher for companies owning the building.” Biris added that the current taxation rate – 1.5

percent of the market value of a building – makes no sense and at this time, “Romania doesn’t need to tax investments instead of enhancing and attracting them.” Foreign investor representatives criticized the current regulations in the Fiscal Code which, among others, includes increased taxation for buildings, at 10-20 percent of the inventory value for structures that have not been evaluated in the last three years. The Code says that buildings not evaluated in the last five years should be taxed at 30-40 percent of their inventory value. Under the former regulations, companies paid 1.5 percent tax on evaluated buildings and 10 percent on unevaluated ones. ■

The privately-owned student campus West Gate Studios in west Bucharest’s Militari area, developed by Romanian company Genesis Development, has seen the launch of a new building of 275 units in the complex, which now totals 650 one- and tworoom suites for rent by students. The total investment in the complex amounts to EUR 40 mln, including the EUR 20 mln spent on the new building. Rents start at EUR 70 per person a month and can reach EUR 350 for two-room apartments. West Gate Studios is part of the larger real estate project West Gate Business District which includes an office division of West Gate Offices, the student campus and a commercial and leisure area with a supermarket, sports fields, restaurant, cafe-bars and a medical center.

events Hard talk at the Automotive After-sales Power Breakfast: The Automotive After-sales Power Breakfast round-table organized by The Diplomat-Bucharest on September 27 addressed the challenges of the sector, bringing to the same table representatives of the largest automotive product distributors, car importers, service station chains and retailers. During the working breakfast 30 top managers debated the trends of their business, legislative issues and solutions to improve the after-sales and aftermarket sectors.

BLU OKTOBERFEST: For the third consecutive year, Radisson Blu Hotel Bucharest organized the German beer, cuisine and tradition festival Blu Oktoberfest. Some 3,600 liters of Hofbrau beer, the original beer of Munichâ&#x20AC;&#x2122;s Oktoberfest, were imported from Germany especially for the occasion.

ART AND NATURE: Volume Art Association organized the

project Space Foam, which brought together artists such as Kiselev Park Judit Balko, Michael Balko, Otilia Boeru, Adina Cioran and Marius Leonte. The papers presented this year were based on the theme of migration and resettlement.

SEASIDE MARATHON:

The third Triathlon Challenge marathon in Mamaia was contested by more than 700 runners. The Triathlon Challenge has five categories: Olympic trial, sprint, relay, Corporate Challenge (a relay for company employees) and Trikids Challenge (a triathlon for children).

60 The Diplomat October 2011

FERRARI FOUR REVS UP: The latest Ferrari model, the Ferrari Four, was presented at an event at the companyâ&#x20AC;&#x2122;s official showroom in Otopeni. The FF is the first Ferrari 4x4 and comes with 660 horsepower. The event was attended by Ion Bazac, president of Forza Rossa, Giancarlo Fisichella, the official Ferrari Formula 1 driver, and Mario Cospito, the Ambassador of the Italian Republic in Bucharest.

events GREEN ARENA: The Ilie Oana stadium in Ploiesti became the

first eco sports arena in Romania, thanks to a solar panel and solar central heating system installed by Ariston Thermo Romania, part of the Italian Ariston Thermo Group. The company has also been the sponsor of Petrolul Football Club since last year. The stadium opened to the public in September.

BACK AT THE MUSEUM: After closing for almost three years

for upgrade works, the Grigore Antipa Natural History Museum has reopened its doors to visitors. The museum contains over 2,000 exhibits, of which 37 are new, including a 17-meter-long diorama and a 20-meter-long artificial cave. The most spectacular items include a white bear, a seal, Canadian sheep and an elephant head belonging to a 75-year-old specimen.

AMERICAN MEETING: Foreign Affairs Minister Teodor

Baconschi met with US Secretary of State Hillary Clinton during a visit to Washington. The occasion saw the signing of the Agreement between Romania and the United States on the location of the US ballistic missile defense system in Romania.

ENERGY-WISE APARTMENTS:Avalon

Residence, a block of 12 energywise apartments, has been completed in the Tunari area of Bucharest, following an investment of EUR 800,000 by the developer Ozone Homes, part of South Pacific Group. Prices of the flats range from EUR 42,500 and EUR 69,750 and all benefit from Ozone Homes technology, which ensures cost-effectiveness for the utilities and the construction process, eco-friendly construction materials and low CO2 emissions.

A DAY WITHOUT CARS: Traffic was stopped for several hours

in 40 locations around Romania, which joined the movement “A Day without Cars”. The scheme is part of the European Week of Mobility, an EU initiative. On the European day without cars, Elena Udrea and all employees of the Ministry of Tourism came to work by bicycle.

SPORTS AND COSMETICS: Gerovital,

the cosmetics brand owned by producer Farmec SA Cluj-Napoca, has signed a partnership with the Romanian Olympic Committee (COSR) to become the main sponsor of Romania’s Olympic Team and supporter of the team at the 2012 Olympics.

city life Dani Lary Counts on mystery Every 100 years, Count du Bois des Naix comes to life at midnight to find the beautiful Valerian. Their union was thwarted when she was poisoned on the eve of their wedding and locked in a tower at the castle. With the help of his allies and some magic, the Count tries to find his lover. This, in a few words, is the story behind French illusionist Dani Lary’s show, ‘Mystery Key’. Explosions, appearances and disappearances in smoke and flames,

Helene Segara sings in Bucharest for first time

guns and guillotines are just a few of the magic moments in store for the audience. Lary’s international tour will start in Bucharest on October 12 at Sala Palatului (Palace Hall), with direction by Iulian Furtuna, a Romanian specialist in visual performances. The show lasts two hours and tickets – which cost between RON 100 and RON 350 – can be bought from Sala Palatului, the Diverta network, myticket.ro and bilete.ro. ■

Cartoons animate capital The international festival of animation, Anim’est, will run from October 7-16 in Bucharest. Founded in 2006, the festival has in recent years become one of the major cultural events in Bucharest and

one of the top animated film festivals in Central Europe. The first four events saw over 1,313 films screened. Tickets for the festival can be purchased online at ticketfan.ro. ■

DJ Van Buuren to spin local decks

Helene Segara will perform for the first time in Romania on October 21 at Sala Palatului. The concert is being organized under the auspices of the French Music Festival in Bucharest and is part of the promotional tour for the singer’s latest album, “Parmi la Foule”, released in April. Segara will perform new tracks as well as those that made her famous throughout the world, such as “Elle tu l’aime”, “Mrs Jones”, “Parle-moi de nous”, “Il y a trop gens qui t’aime” and “Les Vallées d’Ireland.” Concert tickets will cost between RON 90 and RON 250 and are available from myticket.ro. ■ 62 The Diplomat October 2011

The Mission will bring top DJ Armin Van Buuren to town on October 15, just a few months after DJ Tiesto also performed in Bucharest. The Dutch DJ will come to the capital to play at Sala Polivalenta, after the visit he planned for last year failed to materialize. Snatt & Vix, James Ryan, Marciano & Sunnery and many other names on the local music scene will also take to the stage. Tickets can be purchased in advance for RON 60. ■

Swan Lake glides into town Swan Lake, Tchaikovsky’s iconic fouract ballet, will be staged at Bucharest’s Sala Palatului on October 24 by the Odessa Opera and Ballet Theatre, under the direction of popular artist Vladimir Troshenko. The world premiere of the show,

which draws on M. Petipa’s choreography, took place in 1877 at the Great Theatre in Moscow and the production has since astounded audiences around the planet. Tickets for the show can be bought from bilete.ro, eventim.ro and Sala Palatului.■