The Diplomat-Bucharest

Vol. 7, No. 10, December 2011

Celebrating

8

years in the Romanian media

Investment challenges What strengths could help Romania win more FDI?

politics

economics

business

city life

Vol.7, no. 10, December 2011

Traian Basescu met the German president, Christian Wulff, and Chancellor Angela Merkel as part of an official visit by the Romanian president to Berlin in November. Discussions centered on the bilateral trade opportunities between the two countries, privatization initiatives in the energy and transportation sectors and the idea of having a German bank in Romania. Basescu reiterated that Romania will pursue all the necessary reforms to enter the euro zone by 2015

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42

Five-star festivities We round up the winter season parties at Bucharest’s top hotels

Inhospitable climate The corporate travel market has been hit hard by the downturn

34

Negative current Hidroelectrica is finally responding to criticism of its pricing policy

6. Election objection

34. Stamp of approval

The opposition is resisting coalition plans to merge elections

The Romanian Post is shaping up for the modern market

12. Privatization prospects

36. Stand and deliver

The IMF talks about energy and transport opportunities

Courier companies have found themselves in for a rough ride

14. Write a Czech

50. Q tips

CEZ will put EUR 3 billion into local green energy projects by 2012

Our reviewer’s verdict on the latest member of Audi’s Q family

18. Electric avenue

55. Terminal velocity

Horia Hahaianu, Transelectrica’s GM, reflects on his career

Bucharest’s airports are set to undergo some major changes

editorial

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The Diplomat December 2011

Few signs of a prosperous New Year…

A

s the festive season approaches, we at The Diplomat – Bucharest have another reason to celebrate: our eighth anniversary on the market. It’s an achievement we’re proud of – especially given that many other local businesses have succumbed to the hostile market conditions. It seems that these days we are always asking the question: when will the country emerge from the crisis that everyone is talking about? We have been feeling its effects – keenly – for a long time now and we have had enough. We are tired primarily of the economic problems that the crisis has brought, but also because it is quite often used in this country as an excuse, when it comes to cutting or freezing pensions and wages. And freezing prices?

Not so much.

And yet, the time has come for the 2012 budget discussions, unfortunately still a budget built on a deficit. The problem is that, like every year, the attention is focused on cuts to investments, education, culture, agriculture, justice and Parliament, while the budget increases for special pensions, for the presidency and intelligence services go by unremarked.

Before breaking down these budget variations further, we have to look at the differences in the sums allocated in absolute value, the exception being the budget for special pensions, where a RON 1 increase is “rude”, to use a term so beloved of local politicians.

It is not possible to make such a fuss about these special pension categories without seeing that not only has the budget not decreased, but it is expected to grow, while at the same, the majority of the pensions – thanks to the billions of euros of debts run up by the Government – remain frozen for 2012, despite the lifetimes of hard work put in by the contributors.

This can mean only two things: either the law was not applied to the special pensions, or the law was poorly conceived and serves no purpose, as not only has the special pensions budget failed to make any savings, but it actually adds to the deficit!

Back to the budget, where there are marked differences between the labor and

agriculture ministries. Both ministries are important, given the fact that this year Romania’s agriculture supported the economic growth.

For next year the significant cut will come from the unemployment insurance budget, which will fall to an estimated RON 2.4 billion, from RON 4.4 billion. No bad thing, if the savings made were to be because some of the unemployed people found a job, but, unfortunately, the projections foresee only a slight decrease in the average unemployment rate. This is even more worrying as it is estimated that over 40,000 graduates will form part of this unfortunate cohort next year.

The Government must work out where a RON spent will bring added value. The austerity measures seem like they will never end and will not fully solve the current problems. We’ve cut enough in recent years, and, in principle, there has been enough time to fill all the holes that were sucking in money with no justification.

Obviously some downsizing was a necessary evil. But it is now time for the cuts to be “frozen” – to use the fashionable word among politicians these days – and for the Government to start thinking about development policies.

It seems that money is spent far too easily and for nothing. And we are not talking here about spending on pensions and salaries, which are the normal duties of a civilized state, as Romania claims to be. We are talking about other “obligations”.

As one foreign citizen said when comparing his own homeland and Romania: “In our country they steal as well, but they also do something for the citizen.” In other words, if the money is spent, it should be spent usefully.

If there is a clear aim in mind for the next couple of years, we may be able to say that it was worth the sacrifice.

Because so far, let’s face it: except for cuts, the government has not actually come up with a clear, constructive strategy. ■

politics ’Political noise’ undermines public confidence, says IMF

“Political noise” in Romania and elsewhere in Europe is the main reason why public confidence has not rebounded, but the perception will change once the economy recovers, the unemployment rate falls and wages increase, according to Jeffrey Franks, IMF mission chief. Asked if the level of confidence is related to the professional capacities of the government, and if Romania should follow the example of Bulgaria in this field, Franks replied that he could not comment, as he was precluded from pronouncing on individual political parties.

Basescu to ask Kovesi to extend Morar mandate

President Traian Basescu has said he will ask the general attorney, Codruta Kovesi, to extend the mandate of Daniel Morar, chief prosecutor at the National Anticorruption Agency (DNA), by six months, until next summer’s European Commission report. Morar’s mandate is due to expire in two months, said the head of state. This is Morar’s second term, which means he cannot continue to head the DNA under existing rules.

Coalition to proceed with merging elections in November 2012 The UDMR and PDL ruling coalition has agreed to stick with its decision to merge local and legislative elections in November 2012, said Kelemen Hunor (photo), UDMR leader. The coalition also voted on other changes, including reducing the number of MPs to 388 – 300 deputies and 88 senators – and maintaining the bicameral structure of Parliament. Kelemen said that the coalition supports the bills that would bring about these changes. He added that the elections for the Chamber of Deputies will use a plurality voting system, with one third being voted in on a compensation system.

In response, Crin Antonescu, co-president of the USL, warned that his social liberal colleagues will initiate impeachment proceedings if the Government assumes control of the procedures to merge the elections and cut the number of MPs. “We agree with reducing the number of parliamentarians but we don’t agree with the

merged elections. If the Government puts these measures together as a package, we will put forward an impeachment motion,” he said. According to the USL leader, the merging of local and legislative elections would breach the constitutional right of voters to understand and be clear about what they are voting for. ■

Baconschi doesn’t expect Dutch change of heart on Schengen

PSD expels Mircea Geoana

Veteran politician Mircea Geoana has been expelled from the Social Democrat Party.

The president of the PSD’s Arbitration and Moral Integrity Commission, Dan Sova, officially announced that it had recommended the party’s National Executive Committee (CexN) throw Geoana out of the organization. Sova said that the commission investigates any violations of the PSD statute and determines the subsequent penalties.

There were 43 votes in favor of expulsion, five against and two abstentions. Geoana was expelled after making a visit to Washington without informing party leaders, and discussing the possibility of running again in next year’s elections.

The former presidential candidate was also ousted as chairman of the Senate.

The Senate approved the decision to end his mandate as president of the legislative forum at a meeting led by vice-president Peter Philip (of the PDL), which lasted less than ten minutes. The ballot was secret, with votes cast electronically.

The Diplomat December 2011

Romania’s Minister of Foreign Affairs, Teodor Baconschi, said on a visit to Brussels that he doubts the Netherlands will reverse its stance on Romania’s potential Schengen accession

by December 9, when the European Union’s president Herman Van Rompuy expects the final answer regarding the expansion of the Schengen area to include Romania and Bulgaria. On his trip, Baconschi met the Finnish Minister for Foreign Affairs, Erkki Tuomioja, who has lobbied in support of Romania’s joining the border-free zone.

Finland is in favor of a compromise that would see Romania join the Schengen area in two stages, said Alexander Stubb, the

Finnish Minister for European Affairs and Foreign Trade. According to the official, the Schengen space’s air and sea borders should be fully opened to Romania and Bulgaria in March next year, while discussions regarding the land borders will resume in July 2012.

Two countries, Holland and Finland did not approve Romania and Bulgaria’s Schengen entry, due to the Balkan states’ lack of progress in the fight against corruption. President Traian Basescu said that he hoped Romanian diplomats would reach agreement with Dutch representatives soon, in order to avoid having to debate the issue at the European Council gathering scheduled for December 8. ■

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politics President voices concern over bank conduct and possible capital reduction...

President Traian Basescu has told the Economist Conferences Bucharest Summit that European banks have made “huge profits” in Romania, adding that it would not be “fair play” if they left the country unfunded during the crisis. The president added that he hopes that the member states who joined the EU more recently would not pay for the “greed” of banks. The head of state also expressed his concern over the conduct of some lenders.

“I believe that the Austrian Central Bank’s announcement of a reduction of capital flows to non-euro area countries was an error or a misunderstanding of the effects,” said Basescu at the conference in November.

... and lambasts judges, attracts criticism for Constitutional Court visit

Traian Basescu has told an EU meeting that in the future Romania’s judges will select the president. He made the sardonic remarks in a meeting with members of the European Commission to monitor the progress made by Romania in judicial reform and the fight against corruption, which took place at the Ministry of Justice. The opposition Social Democrat Party’s (PSD) department of justice, civil rights and legislation criticized what it called Basescu’s attempts to give judges guidance on the constitutionality of legal acts. The PSD has called for the Presidency and the Constitutional Court to explain the reasons behind the leader’s visit to the court, alleging that Basescu was trying to exert undue influence for his own ends.

ANI asks Supreme Court to investigate six deputies

The National Agency for Integrity (ANI) has asked the High Court of Cassation and Justice of Romania (PICCJ) to investigate six deputies – two from the UDMR, three from the PSD and one from the National Minorities – who hired relatives to work at their parliamentary offices, which constitutes conflict of interest. The relatives were paid RON 165,073 (about EUR 39,303) from the public purse.

The Diplomat December 2011

Basescu urges action on administrative reorganization debate

President Traian Basescu has told a meeting of democrat-liberals that administrative reorganization must be a priority. Debate on the topic has to be completed by yearend, while the Government must consider assuming responsibility for the reorganization, said Basescu.

He added that the democrat-liberals must get the ruling coalition to support the replacement of the county-based structure

with the new administrative units. “Whether there are 12, 14 or 18, the replacement of counties should begin,” Basescu told the PDL team at a celebration of his birthday.

The president believes that the new system could help Romania attract more European financing to develop larger-scale regional projects. According to representatives of the UDMR, the subject has not been raised in recent coalition meetings. ■

Head of state meeting in Berlin focuses on privatization opportunities President Traian Basescu used an official meeting with the German president Christian Wulff and Chancellor Angela Merkel in Berlin last month to address bilateral trade opportunities between the two countries, privatization initiatives in the energy and transport sectors and the prospect of having a German Bank in Romania. Basescu said that, along with other countries with a large financing presence in Romania, such as Greece, Austria, Italy and France, Germany could have a solid input in this sector.

The president urged the German officials to follow Romania’s energy and transport privatization efforts, since these sectors could benefit from Germany’s expertise in environmentally-friendly energy technology. He invited German companies and investors to participate in the privatization of the national rail freight operator, CFR Marfa. German investment opportunities in agriculture and tourism were also on the agenda. Furthermore, Basescu reiterated

that Romania would pursue the necessary reforms to join the Euro zone by 2015.

Currently, the trade figures for the first half of this year indicate a strong increase in the bilateral trade volume, after Romania and Germany exchanged EUR 14.1 billion worth of goods in 2010. So far this year, Germany has exported goods worth EUR 4.15 billion to Romania, an 18.5 percent hike year on year, while Romanian exports to Germany have seen a rise of 28 percent.■

Austria expands ICT investments in Romania

Kari Kapsch, Chief Operating Officer, Kapsch Group

Dan Roman, General Manager, Kapsch SRL

The Austrian Kapsch Group officially launched its local subsidiary and foresees over EUR 15 million within the next three years including a clear commitment to grow the market and expand in Romania Kapsch Group takes this opportunity to announce its will to invest into a team of highly skilled professionals, in order to provide ICT dedicated solutions and services.

“In recent years, Kapsch Group succeeded into achieving significant growth, made profitable acquisitions and is ready to invest according to its clients’ strategies and demands. As you can see, Kapsch is now investing into Romania and strongly believes in the local subsidiary’s success,” said Mr. Kari Kapsch, Chief Operating Officer, Kapsch Group.

By using dedicated divisions, the Austrian company supplies ICT solutions and services for three large interest areas: enterprise clients, through Kapsch BusinessCom; intelligent transportation systems, through Kapsch TrafficCom; telecom operators and railway operators through Kapsch CarrierCom. Kapsch BusinessCom operates in Romania since 2009, by providing services to Kapsch global customers with local activities. Kapsch BusinessCom is actually a meeting point for all Kapsch divisions.

Mr. Dan Roman, General Manager Kapsch s.r.l., believes that for the next three years investments will range between EUR 7 and 10 million. A good percentage of the money will go toward buying companies on the local market. In order to better answer customers’ demands, the acquisition plan considers software technology and services companies or other entities with proven competencies within Kapsch’s main fields of activity in Romania.

“Kapsch addresses the local market with a mix of solutions and services. I am talking about both classical and standardized solutions, applying to a general range of customers, and innovative solutions, efficiently and rapidly solving extended niche issues for our customers. For example, we supply complex solutions for datacenters, integrated communications and security solutions, but also consultancy for IT infrastructure and applications. We also provide cloud computing solutions, Customer

Relationship Management solutions; integration solutions based on Service Oriented Architectures, content and document management solutions. We offer such services both traditionally and through taking over responsibility for certain activities – outsourcing. Hopefully, the positive answer of the market to our business proposal will mean for Kapsch s.r.l. a turnover of more than EUR 15 million within the next 3 years. It would help us a lot in fulfilling one of the basic values of our mother company.

Kapsch wants to become a good citizen of Romania and an important contributor to the public budget,” Mr. Roman added.

•

•

Kapsch – a different kind of an ICT company The whole business world fully acknowledges the importance of information and data. This is why Kapsch wishes to shape its clients’ information systems so they become the most important active factor of the customer’s business.

“The business technologists” is the buzz word within modern world. They are professionals that come up with new solutions for their customers. Kapsch supports its customers’ strategies by using unique solutions and services for each and every customer.

Kapsch does not intend to be a simple solutions and services provider on the Romanian market; instead, it aims to act as an extension of its customers’ business, to be a real partner for them. Kapsch wants to act like an internal asset of its business partner.

Kapsch is a private, family business model supported by no less than 120 years of business tradition. As such, there are many differentiators that single out the company. Among them, one can count: • Financial stability. This is an extremely important business differentiator, especially during a tough economic environment like the current world crisis. Financial stability supports Kapsch reliability and long term

•

•

commitment toward its customers and business partners.

Expertise. Kapsch IT projects integration expertise and competencies are certified by the quality of its staff and by the world leadership position the company enjoys as supplier of ICT solutions for many areas of economic activity.

Innovation. Kapsch logo says “Always one step ahead.” – “Întotdeauna cu un pas înainte.” Since its beginning, Kapsch was oriented toward innovation and made significant investments in researching and developing products and solutions. Innovation for Kapsch means those solutions that bring added value for the customers and can be proven and measured. Kapsch invests more than 7 percent of its annual turnover in R&D for its own products and solutions, to be later found inside projects implemented by our company. With this belief at heart, Kapsch offers modern solutions and services, as are those connected to the integration of social media networks within business networks, thus aiming to achieve real benefits for the customers.

Corporate culture. Kapsch holds high moral standards stemming out of the team and family spirit. Such high moral values were constantly consolidated and enriched with peculiar features of each country where the Group is present.

Flexibility. Kapsch constantly adapts its business model and its business offer by including market changes and challenges induced by the continuous globalization of the demand. The company always builds solutions by cooperating with its customers, in order to fully satisfy their needs.

Kapsch ended its 2011 fiscal year by March, when it reached close to EUR 830 million in sales volumes. The group has subsidiaries and rep offices in more than 30 countries, and enjoys many business references in five continents. More than 4000 employees perform their activity within these subsidiaries and rep offices.

Kapsch Romania World Trade Centre Bucharest - Entrance E, Floor 2, 10, Montreal Square, 011469 Bucharest Phone +40 21 4087373, Fax +40 21 4087374, www.kapsch.ro

economics BNR reduces inflation forecast

The National Bank of Romania (BNR) has revised down its inflation forecast for the end of this year, from 4.6 to 3.3 percent, while the projection for next year was reduced from 3.5 to 3 percent, according to Mugur Isarescu, BNR governor. In addition, the Central Bank’s board of directors has reduced for the first time in the last eighteen months the monetary policy rate by 0.25 percentage points from 6.25 to 6 percent, in a move to revive lending and support growth.

The rate had not been modified since May, 2010. The European Central Bank (ECB) recently reduced its own monetary policy rate by 0.25 percentage points to 1.25 percent.

Companies monitored

by IMF reduce arrears

Companies in the portfolio of the Ministry of Economy, Trade and Business Environment (MECMA) monitored by the IMF have reduced their arrears, cutting their expenses by 4.5 percent and their losses by 50 percent in the first nine months of this year. The Government estimates that the restructuring measures taken by the state companies being monitored under the IMF agreement will allow these firms to reduce arrears by RON 5-6 billion next year, equivalent to 1 percent of GDP. Jeffrey Franks, head of the IMF mission to Romania, said that making public investments in healthcare reform and reducing arrears remain the major challenges for the Romanian authorities next year too.

Revenue hike and expenditure stagnation shape 2012 budget The state budget for next year has been allocated in the context of a deficit of RON 17.1 billion, with revenues of RON 95.65 billion lei, up 13.5 percent on the RON 84.26 billion of revenues projected for this year, and total expenses of RON 112.8 billion, similar to this year’s level.

Given the deficit and growth targets agreed by the Government with the International Monetary Fund (IMF), the consolidated budget deficit should fall to RON 12.1 billion, RON 5 billion less than the state budget deficit.

IMF mission chief Jeffrey Franks said the projection for next year indicates GDP of RON 575 billion, while the deficit will not exceed 2.1 percent of GDP. The cuts will largely be made from the budgets of the Ministry of Finance

(approximately RON 1.1 billion) and the Ministry of Labor (RON 755 million), followed by Agriculture (RON 145 million), Environment (RON 80.4 million) and Education (RON 50 million).

The budget of the General Secretariat of Government will also be reduced by RON 15.4 million, while the Romanian Academy will lose RON 10.4 million. The majority of the additional funding will be awarded to the Ministry of Health (RON 1.23 billion) to finance existing health programs.

The Ministry of Transport will receive an extra RON 727 million, required to pay debts and expenses incurred through transportation facilities for pupils and students. Of this sum, RON 500 million will be used to increase the social capital of CFR Infrastructure.■

Basescu approves anti loan shark law

4G license auction to finish by end of 2012

The auction for the first licenses of fourthgeneration communications (4G, or LTE) will end by late 2012 and the technology will reach in Romania in 2013, said Catalin Marinescu, president of telecom regulatory authority (ANCOM). 4G technology allows data transfers at speeds of up to 100 MB/second in a radio network.

For comparison, local operators’ existing networks provide mobile data transfer speeds of up to 21.6 MB/second. From 1 January ANCOM will reduce interconnection rates for mobile networks by up to 30 percent, to EUR 0.0405/minute, and from September 1 the rate will fall further to EUR 0.0307/minute.

10 The Diplomat December 2011

President Traian Basescu has promulgated a law prohibiting loan sharking, according to a statement made by officials in his administration.

The law, under which usury becomes punishable with between six months and five years of imprisonment, was proposed by members of the Democrat Liberal Party (PDL) and national minority parties.

The legislation defines usury as “excessive interest that a loan shark

charges on borrowed sums” and a loan shark as “a person who lends money at excessive interest rates”.

It was adopted in October by the Chamber of Deputies after being rejected by the Senate. Initially, the bill proposed sanctioning loan sharks with imprisonment of one to three years, but lawmakers approved the wider sentencing range. The law remains transient until the new Penal Code enters into force. ■

economics Government to investigate wealthy Romanians

Cornel Marian, Oresa Ventures’ managing director in Romania What is the fund’s strategy regarding placing money locally?

Our ambition is to have two-three investments per year in companies that are in need of growth capital or in companies where we offer the opportunity of an exit for one or more shareholders or founders. Our investments target between EUR 10-20 million per project for companies heading towards profitability. Our top segments are generally construction materials, financing, business services, FMCG and retail.

The Government will start a program next year to investigate very wealthy individuals, by inspecting the affairs of people involved in real estate transactions over 2006-2008, in an attempt to combat tax evasion.

Other planned measures in this area are: controlled electronic commerce, to identify the “tax risk” of individuals’ and businesses’ failure to declare their status of trader, increasing the number of active mobile teams in the field and traffic inspections, a computer application development for monitoring the

transport of excise goods under suspension of excise duties, including intra-community movements with excise duty paid in the member state of dispatch.

Last spring, the National Agency for Fiscal Administration (ANAF) carried out several checks of individuals involved in real estate transactions and new construction over 2006-2008, when 7,145 people were investigated over their participation in 85,442 deals totaling RON 14.88 billion, according to media reports.■

IMF seeks clear privatization plan for state energy and transport companies

Do firms correctly evaluate their sales prices according to the growth potential?

I think there is a gap between the expectations of entrepreneurs and sellers and the price asked for a business. We may be heading towards the end of a recession but we also have to face overall modest economic growth. Business owners have started to adjust their expectations and to understand that they need to attract money for investments.

We sense on the local market a growing and improved number and quality of investment opportunities.

What do you expect for the mergers and aquisitions market for 2012?

I think that we will see more intense activity coming from funds targeting local privately-held companies that need capital to modernize operations, in order to compete with the multinationals. With the lack of banking or other financing, and with founders looking for succession at the head of their businesses, companies will have to keep up with capital infusions coming from investment funds. The firm has over EUR 100 mln invested in Fabryo, Somaco, Flanco, la Fantana, Credisson, Kiwi Finance, Medicover, Synevo and the recent acquisition of RTC’s Proffice division.

12 The Diplomat December 2011

International Monetary Fund (IMF) officials have asked the Romanian Government to come up with a plan for the privatization of state companies in the areas of energy and transport, as well as the liberalization of natural gas and electricity prices for companies and households.

A similar plan was also specifically requested in the field of healthcare reform. According to sources quoted by news agency Mediafax, IMF officials endorsed the reform measures initiated in recent years in some areas, such as those put into action by the Ministry of Labor and Ministry of Justice.

In addition, IMF officials have approved an increase in salaries and pensions for the second half of next year, provided budgetary resources are available, a non-binding agreement that does not override the general provisions of the last letters of intent.

The IMF made known its approval of the salary and pension increases in a discussion with coalition leaders.

Letters of intent signed last year by the Romanian Government assured the IMF, among other measures, that social security contributions would be reduced in the second half of the year if the tax collection rates allow for it. ■

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green energy Filasa to invest in 12 wind parks in Suceava

Filasa International, a French-capital privately-held firm, has launched a EUR 780 million project in Romania, comprising the building of 12 wind parks in nine areas of Suceava. According to the company, the 12 wind parks will deliver a total capacity of 519 MW. The scheme has been launched after two years of research and EUR 6.2 mln of investments in different studies on the local market. Another EUR 840,000 will go on construction permits for the first six parks, while the construction of the rest will cost the company another EUR 1.5 million. Each of the wind parks will be built on an area ranging from 350- 400 hectares, and they will feature Vestas turbines with installed power capacity of 3 MW each.

Electrica to buy 15 wind turbines for Frumusica wind park

Electrica, Romania’s only state-controlled electricity distribution and supply company, has plans to complete the Frumusica wind park by the end of 2012, according to the project manager’s schedule of execution. ”Procurement procedures for the Frumusica wind farm, situated in Galati county, which is set to have 15 wind turbines with about 3 MW of power each, will be completed by the end of this year,” said officials. The park is the first project initiated by the Romanian state in an area that has attracted the attention of global wind energy giants.

Linking wind parks to the national grid ‘will cost EUR 500 million‘

Connecting wind farms to the national power transmission system requires the investment of EUR 500 million, funds which Transelectrica does not have, according to Octavian Lohan, Transelectrica’s deputy director, and some production capacity will be restricted if the company does not find funding sources. Late last year, wind electricity production units of 462 MW were installed in Romania. The capacity could reach 1,000 MW later this year and double in 2012, according to Transelectrica information.

14 The Diplomat December 2011

Verbund initiates construction of first section of Casimcea wind park Following an investment estimated at around EUR 300 million, Austrian company Verbund has announced that the electric station at its project in Casimcea, south-eastern Romania, is now completed. According to the company’s representatives, Romania delivers the ideal conditions for the development of wind parks, due to the climatic conditions, which are comparable with those along the German coast of the North Sea. The project developed by the Austrian company in Tulcea County is the largest electricity project by an Austrian firm in Romania, and the construction of the first section of the project has started after a development stage of three years.

Verbund, which has global businesses worth EUR 3.5 billion, plans to complete and prepare the wind farm for exploitation by next year. According to the project description submitted to the Romanian Ministry of Environment and Forests, Verbund has joined forces with a local developer in Tulcea to build the 200 MW wind farm. The project will consist of 77 turbines in four groups.

Tulcea is also on the map of the Portuguese company Martifer, which signed a financing agreement worth EUR 23 million with Banca Comerciala Romana (BCR) in April this year for a wind farm of 42 MW in Babadag, in the Dobrogea region. The Babadag project has 20 turbines, split into two groups, of 16 and

4 turbines respectively. Martifer intended to start a wind farm in Babadag in 2007 but disagreements with local authorities caused the project to be postponed until 2010. ■

CEZ announces EUR 3 billion investment in local energy projects Czech Group CEZ, which has had large energy projects in Romania since 2005, has announced another significant investment in the local energy sector, through which it is planning to develop 2,000 MW of green energy projects by 2013. The projects equal the capacity delivered by three units of the Cernavoda nuclear plant, and are projected to require a EUR 3 billion outlay. According to company representatives, having obtained subsidies for the projects, the group will support further schemes, such as the building of two new nuclear reactors in the Czech Republic for a plant in Temelin. In Romania, the group is building the largest windmill project in Europe, worth EUR 1 billion, in the southern areas of Fantanele and Cogealac.

Though due for completion in 2011, company officials said in a statement that the investment

would only be finished in 2012, a year behind schedule. “There are 130 lawsuits involving Cogealac, and instead of carrying on with the project we have to pay attorneys for these trials. The plan is to have 120 windmills up in 2012,” said Jan Veskrna, CEO of CEZ Romania. The wind park in Cogealac has a capacity of 600 MW, as much as a reactor at Cernavoda.

There are to be erected 240 wind turbines of 2.5 MW each, delivered by General Electric.

The total value of assets registered by CEZ Romania at the end of 2010 was 25 percent higher than the previous year due to its continued investment in wind farms in Fantanele and Cogealac, according to company officials.

During 2010, CEZ Distribution SA focused on carrying out the investment plan approved by the ANRE for improving the quality of distribution. ■

appointments George Argentopoulos

will be the new CEO of Baneasa Shopping city. He will replace Ali Ergun Ergen who hold the position in the last 6 years to the development of Northern Bucharest commercial project Baneasa. Argentopoulos left Romtelecom’s management in 2007. Ergun will keep the consultancy link with Baneasa Shopping City.

Cristian Herghelegiu

is the new country manager of online payment integrator e-Payment, part of PayU group, while Daniel Nicolescu has been promoted regionally to chief product manager for the entire PayU group. Herghelegiu has over 13 years of experience in IT&C, having been the coordinator of Microsoft Romania’s business solutions division since 2004.

Earlier this year, he joined e-Payment as business strategist.

Alexander Adames-

will lead Astra Asigurari, replacing the former president of the board, Radu Mustatea, who has decided to withdraw from the position effective from January 1. Currently, Adamescu is the vice-president of the Supervisory Commission of Astra Asigurari. cu

Bela Kovacs has been assigned to serve as general manager of Recolamp, after several years working on the association’s projects. Kovacs has over 20 years of experience in the lighting sources industry, having worked as manager of the lightning division at Electro-Cord Hungary since 2004. Since May of this year, he has also been in charge of the two companies with Hungary and Romania’s common transboundary project over 2007-2013, intended to reduce pollution and improve lighting waste management.

Yves D’arfeuille is the

new head of property management for real estate consultancy company DTZ Echinox. He has extensive experience, working on the retailer’s side, with Carrefour and with retail developer EMCT Romania, where he was involved in the development of several Cora and Baumax projects, as well as in the development and management of Sun Plaza Bucharest.

Andres Vicente is the

new chief commercial officer of Enterprise Business Unit (EBU) at Vodafone Romania, replacing Gabriela Matei. Before joining the firm, Andres had served as EBU sales director for Vodafone Spain since 1995, apart from a three-year break when he worked for a strategic consulting firm. Andres had held several senior positions in EBU departments such as sales and marketing before his promotion to sales director in October 2009.

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

16 The Diplomat December 2011

investments BELGIUM & ROMANIA

La Lorraine and Macromex stump up dough for EUR 17 mln bread factory in Campia Turzii

The Belgian La Lorraine Bakery Group and Macromex, the Romanian bakery products distributor, will invest EUR 17 mln in a factory in Campia Turzii. In the first stage, the plant will be equipped with an automatic production line that has a capacity of 5,000 rods per hour. The next steps will be to expand the plant with up to 8 production lines, requiring an additional investment of EUR 40 mln in the coming years.

GERMANY

Draxlmaier to invest EUR 30 mln at Satu Mare

German company Draxlmaier has recently announced that it will invest about EUR 30 mln in expanding the production of automotive electrical wiring in its Satu Mare plant. The investment – which will start next year – should be finished in 2013 with the formation of about 1,000 jobs. Draxlmaier’s current investment in Satu Mare reaches about RON 113 mln and created over 4,300 jobs. The group’s aggregate investments in Romania since 1993 total about EUR 200 mln and 12,000 positions.

WORLD

USA

GlaxoSmithKline (GSK) has completed a USD 7 mln investment in two production lines at its Brasov plant. The investment, which was rolled out over three years, was made in the manufacturing lines for the antidepressant Seroxat and the HIV treatment Retrovir.

GSK is currently exporting drugs to over 80 countries, compared to just 50 at the end of last year. The largest export markets for the GSK plant in Brasov are France and Italy, which represent 24 percent of total exports.

Timisoara-based paint manufacturer Azur, a subsidiary of ICC Industries Inc. New York, has budgeted investments of about EUR 2.5 mln which will mainly go into new technologies for the production of alkyd paints.

Nearly EUR 1 mln will go into the company’s composite division (involved in the production of electrical cabinets, decorative plates and channel benchmarks for stadiums). The company had a turnover of around EUR 11.8 mln in Q1, up 11 percent on the same period of last year. It has about 270 employees.

Tenaris targets USD 150 mln of investments by 2013

TRW Automotive builds steering wheel cover factory in Bihor

GSK Romania completes USD 7 mln investment in Brasov plant

Tenaris Group targets investments of USD 150 mln in Romania by 2013, mainly in the construction of new thread pipe units for the oil industry and energy sector. The company recently opened a service center for companies in the oil and gas industry, representing an investment of USD 5 mln.

The center is located in the Ploiesti Industrial Park and aims to reduce customer costs and risks. Tenaris entered the local market in 2004, since when it has invested over USD 150 mln in two production units in Romania.

Azur puts EUR 2.5 mln into Timisoara factory

American car parts manufacturer TRW Automotive is building a leather steering wheel cover factory in Margita, Bihor County.

Production is due to start at the beginning of next year. Company officials have said that 340 people will be employed next year.

The American group is present in Romania through its subsidiary TRW Automotive Safety Systems, which produces wheel and airbag components in six factories, two in Timisoara and the others in Deta, Oravita, Lupeni and Resita and counts 3,400 employees.

17

business leader

Electricity chief embraces state switch Coming from the private sector, Horia Hahaianu, Transelectrica GM, took up the challenge of running a state-owned company. He tells The Diplomat – Bucharest the latest details on the company’s major projects.

By Dana Verdes

“I

have worked in the private sector for a long time, but the most difficult moment of my career was when I was put in charge of a state-owned firm,” Horia Hahaianu, Transelectrica GM, tells The Diplomat – Bucharest. Hahaianu was appointed GM of the state-owned energy transport operator, Transelectrica, in May this year. After half year at the helm of the company – which has 2,200 employees – he calls his work “a huge responsibility”.

“When you’re the GM of Transelectrica you have no more spare time or hobbies. You have to focus all your energy on this company.

It is like a living organism, and you have to be connected to it all the time,” says Hahaianu.

“The great challenges since my arrival have been to offer competitive services despite cutting costs, to obtain solid revenues, to consolidate the company’s financial position and also to develop the interconnection networks with neighboring countries.”

Blowing hot and cold

A special problem posed by wind projects is the large volume of new investments necessary to bring about production, with no any guarantee that all the projects will be realized or secure the necessary financing, says Hahaianu. According to Transelectrica information, connecting the wind parks to the national grid involves investments of EUR 18 The Diplomat December 2011

Who is Horia Hahaianu?

He has served as GM of Transelectrica since May this year. Between 2009 and 2011, he was GM of telecommunication operator Teletrans and IT-Transelectrica Branch, and advisor to the Communication Ministry. Before 2009 he worked in the IT&C industry.

500 million. “To take over a large amount of electricity production from these plants we need investment in the development of specific consumers to take the production or to store the energy that can be used as needed when the wind does not blow,” he adds.

The GM believes that legislative proposals to support investments in electric cars and in battery-charging stations are needed.

“Some of the revenues obtained from promoting the renewable energy scheme could be invested in these consumption systems, energy storage or quick start groups to replace the thermo groups that were shifted to allow the renewable energy into the grid,” says the Transelectrica GM.

Show me the money

In mid-November the Economy Ministry inked a deal with a consortium formed of

BCR, Intercapital and Swiss Capital to list a minority share package (15 percent) of Transelectrica on the stock exchange. “As soon as the contract comes into effect, we will provide information for the development of the package offer, of course observing all the conditions imposed by the capital market legislation on privileged information. We want it to be a successful share sale,” says Hahaianu.

According to him, the company hasn’t had a capital increase in the last three years. “However, in the future we will consider a capital increase by attracting financial resources through the primary public offer, which we will use to finance investment that would represent an increase of about 12 percent, of course on the condition that the Romanian State remains shareholder of the company.”

Turning to Transelectrica’s shares, the company GM tells The Diplomat – Bucharest that the performance was similar to the overall market one and although the last two reports (Q1 and at 9 months) showed good results. “Yet, this was not directly reflected in the share price,” says Hahaianu. The price peaked at RON 23.49 on June 1 and hit a low of RON 16.4 on August 8 this year.

Fragile investments

Despite the turmoil on the international and national markets, the company has continued, albeit reticently, with its investment plans.

This year Transelectrica announced that it had modernized the electrical stations in Lacul Sarat and Brazi Vest as well as the control systems in 11 stations.

“Next year we will continue the modernization works at the projects in Lacul Sarat, Mintia and Brasov. We also have plans to start new modernization works in Tulcea Vest, Barbosi and Turnu Severin Est,” says the GM. While the company has notched up some concrete results in terms of its local objectives, it’s a different story with the interconnection lines with neighboring countries. Hahaianu says that the feasibility study for the SuceavaBalti connection line has been approved, and the design specifications and draft project now have to be developed. “What has not been clarified is the project financing for the portion of the line located on the territory of the Republic of Moldova,” adds Hahaianu.

The feasibility study for the Falciu-Gotesti line has also been approved and updated. Also, the additional documentation between Transelectrica and Moldelectrica to continue the project has been signed.

For the interconnection with Serbia, from Resita-Pancevo, the documentation has been completed and approved.

“What follows is to secure a Government bill for the approval of the technical-economical indicators and the start of the expropriation procedure,” says the GM. ■

law

The missing piece of legislation necessary for RES Law 220/2008 was published

O

n July 13, 2011 the EU Commission, after more than two years, finally approved the promotion scheme with Green Certificates (“GCs”) set forth in Law no. 220/2008 for RES-E producers (“Law 220/2008”). This should have been the last prerequisite before the Romanian Energy Regulatory Body (“ANRE”) would have issued the long awaited secondary legislation – the Regulation for the Accreditation of RES-E producers to the promotion system. However, prior to ANRE issuing the mentioned Regulation, several amendments to Law 220/2008 were required by the EU Commission. Therefore, on October 12, 2011 the Romanian Government approved the Emergency Ordinance no.

88/2011 for amending and completing the Law 220/2008 (“EGO 88/2011”).

The main amendments brought to Law 220/2011 by EGO 88/2011 are: (a) “Overcompensation” Principle Introduced; “Overcompensation” occurs when, (considering the yearly average technical - economical indicators of each technology (e.g. wind, PV, small hydro etc.), from the analysis of cost / income for all production capacities using the same technology), the internal rate of return (“IRR”) on a particular technology is ten percent (10%) higher than the IRR value considered for the respective technology when the promotion system was approved.

If out of the data provided by the feasibility studies for new investment projects and the results of monitoring the investment / operational costs and the revenue stream of the existing RES-E producers, the parameters for each technology (e.g. wind, PV, hydro, etc.) differ from those taken into consideration when the promotion system was authorized and such difference may lead to overcompensation, ANRE may propose to reduce the number of GCs for that specific technology.

The reduction of GCs must be decided by the Romanian Government under a Governmental Decision. All RES-E producers who commence the production after the Governmental Decision for reducing the number of GCs for that particular technology was issued will benefit only from the reduced number of GCs. (b) the number of GCs granted for geothermal, biomass, bio-liquids, biogas was reduced from 3 to 2 and from 3 to 1 for gas resulting from waste processing and the gas produced from mud which is the bio-product of the waste

water treatment equipment; EGO 88/2011 defines for the first time “energetic crop”. Such crop means those crops from agricultural or non-agricultural plants especially designed for the production of bio-carburant or for biomass production used for producing electric or thermal power.

As results from this definition of “energetic crop”, wood waste would not be considered such a crop.

EGO 88/2011 reduces the number of GCs granted to RES-E producers from biomass from 3 to 2. However, if the produced energy in biomass production facilities comes from energetic crops, one additional (1) green certificate is granted for each MW produced and injected into the grid. (c) one (1) GC will be received during the testing period; EGO 88/2011 introduces the possibility of the RES-E producers to receive one (1) GC during the testing period based upon a preliminary accreditation. (d) the period for which the RES-E producers benefited from GCs prior to the applicability of Law 220/2008 will be deducted from the period of the newly introduced promotion system; (e) partial incompatibility between state aids / EU funds and GCs; EGO 88/2011 provides that ANRE will reduce the number of GCs for a RES-E producer by reducing the value of the investment per MW with the EU funds / state aid received per MW and keeping the approved IRR. (f) the GCs will be valid for a period of sixteen (16) months; (g) until the national targets are achieved (i.e.

2010 – 33%, 2015 – 35%, 2020 – 38%), the sale of RES-E benefiting from the promotion

system under Law 220/2008 shall be carried out only in order to cover the electricity energy gross final consumption of Romania; (h) individual authorization for RES-E project with an installed capacity higher than 125 MW; EGO 88/2011 introduces special provisions with regard to RES- E projects higher than 125 MW. A RES-E producer who develops a RES-E production facility with an installed power capacity exceeding 125 MW and who fulfills the conditions to be accredited for the promotion system under Law 220/2008, must draft and submit the necessary documentation for the detailed assessment of the support scheme by the EU Commission.

Notwithstanding the above, Article II of EGO 88/2011 provides in paragraph (3) that the RES-E producers, who on the date of EGO 88/2011 operate RES-E production facilities with an installed capacity exceeding 125 MW, shall be accredited by ANRE and shall benefit from the number of GCs currently granted

by Law 220/2008 for a period of twenty four (24) months. Such RES-E producers must submit the necessary documentation for the detailed assessment to be conducted by the EU Commission within three (3) months as of the accreditation decision issued by ANRE. If the EU Commission establishes a reduced number of GCs for a RES-E producer, then the difference of GCs received by the RES-E producers must be recovered within twenty four (24) months, based on a decision issued

by ANRE. In such instance, the number of GCs granted to this RES-E producer will be reduced and / or the RES-E producer will have the obligation to acquire a number of GCs. (i) the existing RES-E producers have an obligation to request ANRE to accredit them to the promotion system within thirty (30) days and they will benefit from the promotion system under Law 220/2008.

Ciprian Glodeanu LL.M. Head of energy and real estate WOLF THEISS SI ASOCIATII Bucharest Corporate Center Gheorghe Polizu str. 58-60, 13th Floor Sector 1, RO-011062 Bucharest, Romania www.wolftheiss.com

19

hidroelectrica

Hidroelectrica finally galvanized over dodgy discounts After the European Commission started an investigation into possible state aid in relation to the cheap energy acquired by “smart guys” on the local energy market, officials from the state-owned energy producer Hidroelectrica are now talking about price renegotiations of at least 3.5 percent and even the annulment of contracts.

By Dana Verdes

T

he days when the smooth operators were buying cheap energy from stateowned electricity producer Hidroelectrica now look numbered. Compa-

nies like Alpiq, ArcelorMittal Galati and Energy Holding have for years enjoyed preferential prices for their electricity, and despite an outcry the cheap energy contracts were extended.

The various high-level debates on the subject were not enough to stop this way of handling state assets, nor did the finger-pointing that the Hidroelectrica management endured for years for selling its product below the price it would have received if selling it though the Romanian Power Market Operator (OPCOM).

Recently, both the minority shareholder of Hidroelectrica, the Property Fund, plus the International Monetary

Fund (IMF), World Bank (WB) and European Commission (EC) have taken an interest in these canny operators’ contracts and the results are now showing.

Minority shareholder flexes major muscle

Recently, officials from the Property Fund, which is managed by Franklin Templeton Investments, the minority shareholder of Hidroelectrica, have started the fight against the practice. Greg Konieczny, Property Fund manager, tells The Diplomat – Bucharest that the measure was necessary as Hidroelectrica is being harmed by the bilateral contracts

“Hidroelectrica should have offered the electricity through the market in a transparent auction process and accepted the highest offers,” Greg Konieczny, Property Fund manager

20 The Diplomat December 2011

hidroelectrica

“Indirect subsidies are not the solution for emerging from difficult conditions in sensitive sectors. Not in Romania, and not in the rest of Europe,” Joaquin Almunia, EC vice-president

signed for values significantly below the market price.

“It is our view that a company like Hidroelectrica should have a profit margin of at least 20-30 percent. The company should have offered this amount of electricity through the market in a transparent auction process and accepted the highest offers,” said Konieczny. “This is why we have recently started legal action against the board members of Hidroelectrica, as the bilateral agreement with ArcelorMittal Galati is a preferential contract signed for a sum below the market price, thus causing major prejudice to Hidroelectrica and therefore to the fund’s shareholders.”

The long arm of the EC

The European Commission (EC) is also on the case, and announced recently that it is currently looking into potential aid given to the Romanian steel and aluminum producers ArcelorMittal and Alro, through reduced electricity tariffs from Hidroelectrica. Moreover, EC officials have also announced that they have started looking into potential state aid issues in Hidroelectrica’s contracts with some electricity retailers and other industrial clients.

“We all know that transition processes take time, but new and indirect subsidies are not the solution for emerging from difficult conditions in sensitive sectors. Not in Romania, and not in the rest of Europe,” Joaquin Almunia, the EC’s vice-president, told The Diplomat – Bucharest.

He added that the EC is always vigilant over indirect forms of state support,

including when aid is given in the form of reduced electricity tariffs for specific industrial clients. “Such forms of aid in practice reduce the production costs of the beneficiaries, and are therefore particularly harmful to their competitors.

We took a firm position in the Italian cases concerning ALCOA, Portovesme and Terni, and in the recent Aluminum of Greece case,” added Almunia.

He went on to argue that reduced electricity tariffs hamper the development of genuinely liberalized electricity markets. When electricity prices are not set freely on the market, the whole functioning of the electricity market is distorted, and prices for the rest of the consumers become higher. Industrial consumers from other sectors of the economy are also affected, having to bear the additional costs caused by the distortion in electricity prices. “The commission will therefore ensure that state aid discipline is preserved in these sensitive sectors as well as in other industries,” said Almunia.

Hidroelectrica backs down

Following the meeting between IMF, WB and EC representatives with Romanian Government and Economy Ministry officials at the beginning of November, it was decided that Hidroelectrica would announce its intention to cancel its longterm bilateral contracts for electricity delivery. However, according to Hidroelectrica officials, no deadline was set for the task.

“All the contracts that expire between

Who bought cheaper energy in 2010?

Company % of Hidroelectrica’s

production Alro 15.6 Energy Holding 13.1 Alpiq RomEnergie 9 Mittal Steel Galati 8.5 Alpiq Romindustries 7.9 Price per MWh on OPCOM

Price RON/MWh 112.3 119.9 119.6 130.2 119.9 153.9 SOURCE: Property Fund

2015 and 2018 have price renegotiation clauses. Our intention is to reach the market level price. If the parties with which we are negotiating do not accept these price hikes and the contracts allow it, we will cut deliveries. The negotiations start with a 3.5 percent increase,” Constantin Trihenea, Hidroelectrica GM, told The Diplomat – Bucharest.

The firm announced towards the end of September that it would apply the force majeure clause to all its contracts, and all production would be delivered proportionally based on a unique mathematical formula for all contracts.

Companies fight their corner

Contacted by The Diplomat – Bucharest, Swiss company Alpiq said that it was not currently willing to comment on the ongoing negotiations.

Meanwhile, Energy Holding representatives told The Diplomat – Bucharest, “The European Commission will be provided with all requested information and we are certain that, further to their analysis, the European authority will establish that any suspicions of state aid are ungrounded.”

They continued, “During its performance, the contract has been amended several times in favor of Hidroelectrica, especially in respect of the price, which has been substantially increased. The overall economic context, developments on the energy market and Hidroelectrica’s needs were taken into account upon the implementation of such amendments.

Given the long-term partnership that we have built with Hidroelectrica, we are confident that all disagreements will be settled to the benefit of both parties.” ■ 21

Overview 2011 RoRec Association’s WEEE collection campaigns Romanians are willing to recycle and are concerned about the environment, one of the main impediments in their way is the fact that in Romania there is not a coherent collection system in place.

RoRec Association in partnership with municipalities implemented a national selective collection program this year, “The waste doesn’t belong at home. Take it for a hike!”. So far, in less than nine months, the volumes of collected waste electric and electronic equipments (WEEE) exceeded 1,000,000 kilos, in more than 200 campaigns run in 39 counties, namely 550 localities around the country. The collection campaigns organized in partnership with municipalities and local authorities gathered over 2,000 volunteers – pupils and teachers from kindergarten, primary, secondary schools and also high-schools. More than 45,000 people were happy to find the correct solution for their WEEE, moreover since the solution is a safe one for the environment and it provides assurance that the old EEE will be properly treated and recycled, according to European standards in this specific area.

The WEEE collection process basically depends on two factors: creating the proper infrastructure for selective collection, namely the drop-off centers compliant with EU environmental standards, and also public education and awareness raising so they know they can use this service that provides proper WEEE management.

22

“WEEE are nowadays a pretty big problem, considering the rate in which people are changing their electric and electronic appliances,” explained one citizen from Bucharest who participated in RoRec’s project.

Many of the people that drop-off their WEEE said they read about the program in their local newspapers, and they were happy to hear about it, since all of them had in their household old appliances, but did not necessarily know how to dispose of them in a safely manner for the environment.

“This is the TV set where I watched Nadia Comaneci during the Montreal Olympics!” exclaimed another citizen, adding that it was difficult to depart from it, but happy he knows some of the TV’s components can be treated and recycled in compliance with EU environment norms, and some of their fractions used in industry, and secondary raw materials. “The results in our collection campaigns proves once and for all that Romanians need these types of services, they appreciate our project and are aware of the fact

By the end of 2013 the Association RoRec will open in partnership with municipalities over 100 permanent selective drop-off centers in the country, thus providing to millions of Romanians this type of service.

that the appliances will be recycled according to EU environment legislation. The concern about the environment is turning into reality, and is fully confirmed by the rate of participation in this national campaign, and also by the positive reactions from our participants,” explained Mr. Liviu Popeneciu, President of RoRec Association.

Collecting WEEE is seen nowadays as a strategic domain all over Europe, since these appliances contain toxic components for the environment and for our health.

If they are properly recycled this means they will be eliminated without polluting the environment and also can be reintroduced in the industrial process as secondary raw materials, thus protecting the natural resources. At European level, strategies are now being created and they mention a “society of recycling”. This happens because the “engine” in the latest technologies in electronics is now provided by critical materials, like gallium, indium, germanium,

tantalum – all of these having a restricted natural exploitation. To overcome this limitation, Hi-Tech producers are already focusing on WEEE, that is becoming an alternative source, since the treatment and recycling technologies is constantly managing to extract more and more secondary raw materials.

Lead, mercury and cadmium are just a few of the substances that are extremely toxic, and which pollute irreversible once they have been released in the environment. A ten year-old refrigerator contains freon, a gas that when released in the atmosphere destroys the ozone layer.

Also, batteries and accumulators contain substances that once they reach the soil, can produce intoxication, namely allergies, sterility, memory loss, heart diseases and even cancer. The mercury in one battery can pollute 500 liters of drinking water, or – for 50 years – one square meter of land!

The partners of RoRec Association that offered the prizes in “The waste doesn’t belong at home. Take it for a hike!”collection program are: Albastros, Arctic, Bosch, Candy, Carrefour, Comatex, Indesit, Philips, Severin, Skil and Whirpool.

Contact: Romanian Recycling Association RoRec Andreea Idriceanu Calev – communication manager Email: andreea.idriceanu@rorec.ro Mobile: 0728 22 22 32 23

investment map

Mapping the money On a global market that allows production to relocate to where the investment benefits are greater, which of Romania’s assets can put the country on the investor’s map?

By Dana Verdes

T

he body’s circulatory system functions properly when blood passes not only through arteries, but goes all the way to the capillaries. So should the economy work as well.

Let’s assume that companies that operate primarily in the field of exports by assembling mainly imported goods are the arteries, while the agro-businesses, furniture firms, wine and milk industries, small and medium enterprises make up the capillary system.

Data show that in 2010 and 2011, only exporters, the large vessels of the economic body, functioned well. The key is to push the circulation of money to the peripheral areas, or to ‘capilarize’ growth.

To succeed in export markets, Euro zone economies need to be competitive, say specialists.

One indicator of how successful countries have been at exporting is the proportion exports make up of the entire economy.

Data reveal that in Romania, only in those counties where a large investment has settled

have the exports per capita hiked.

For instance, in Arges, where French carmaker Dacia-Renault set up camp last year, the exports per capita reach EUR 3,681; in Cluj, where Nokia based its operations, the figure was EUR 2,540 in 2010; while in Vaslui it was a mere EUR 300.

But the picture is changing: Nokia announced earlier this year that it would relocate its local operations to the Asian market, as of 2012.

“If you build a Nokia plant in the middle of the country, you cannot assume that it will help the entire economy to develop.

Don’t think that the economic development is secured this way. You must identify the best thing you can do, what know-how and what resources you have to hand,” Mario Cospito, Italian ambassador to Romania, advised in an interview at the beginning of the year.

“For example, if you are a little town in the mountains, you cannot make airplanes. You must search for a ‘vocation’. Let’s take the furniture industry. In Italy there are a lot of

“The crisis has to some extent stopped the salary hikes and led to an efficient activity in many industries, which has partially mitigated the gaps,” Bogdan Belciu, partner, advisory at PwC Romania

24 The Diplomat December 2011

little towns in the north that are specialized in chairs, with tens of small furniture plants.”

These arguments invite the question: what are Romania’s aces on this global market, where relocating production from CEE to a country in Asia is now the fashion?

Pluses and minuses

Foreign investments have covered many economic sectors and Romania continues to be attractive in all of them, in terms of costs, education, workforce skills and often the size

investment map

“With the expansion project scheduled to start next year, Continental Tires Timisoara will also create another 300 jobs,” Pedro Carreira, GM at Continental Tires Timisoara

of the domestic market, say commentators.

“Also, solving problems that we have faced for years, such as infrastructure, legal stability and confidence in the public sector, is necessary to provide a stable and attractive environment for foreign investment,” Bogdan Belciu, partner, advisory at PwC Romania, told The Diplomat – Bucharest.

In his opinion, however, the cost advantages will erode over time and so it is important to emphasize the sectors with higher value added, such as research and development and innovation.

Economist Daniel Daianu talks of the 3L and 3H rule when characterizing Romania: low EU funds absorption, low fiscal revenues, low productivity, and high corruption, high waste, high inefficiency.

Wages still low?

Labor productivity in Romania is lower than in Central Europe and for several years it has grown more slowly than wages, which questioned the sustainability of economic growth in Romania until 2008-2009.

“The economic crisis has to some extent stopped the salary increases and led to more efficient activity in many industries, which has partially mitigated the gaps created,” said Belciu.

In his opinion, overall, labor productivity in foreign firms is higher than among Romanian companies: multinational companies come with international experience that is gradually adapted and implemented in Romania.

“As a result, these companies generally have better productivity and are often a model for Romanian companies, some of which begin to gradually close the gap in terms of productivity,” added Belciu.

Education drives growth

“If Romania wants to become a more attractive destination for investors, education must be a priority,” Alexander Milcev, partner in the fiscal and legal assistance department at Ernst & Young Romania, told The Diplomat – Bucharest.

However, Hein van Dam, partner in charge of Balkan region financial advisory at Deloitte, told The Diplomat – Bucharest that the brain-drain is a major issue for Romania.

“We should look at what Singapore or China has done or is still doing. They bring people back from overseas after having gained international qualifications and experience, pay them more to come and drive the changes in the country. Their strategy is to bring the base back in and transfer the knowledge,” said van Dam. In his opinion, Romania is doing very well in the software, IT and automotive sectors. “Romania has a legacy of a very good education system, but what are we doing with that and why aren’t we developing more niche manufacturing or technology clusters?

The automotive space is a success story for Romania and the related industry of automotive could potentially be competitive,” he added.

Romanian firms in Top 500 in Central Europe Company (2010)

OMV Petrom Automobile Dacia Arcelor Mittal Sews Romania Delphi Packard Romania USA Draxlmaier Autopart Romania Takata Petri DRM Draxlmaier Romania Sisteme Electrice Ford Romania Daewoo Mangalia Heavy Industries

26 The Diplomat December 2011

Turover 2010 (mln euro) 3,322.20 2,715.10 987 179 233.5 69.3 297.6 30.3 139.8 403.6

No. of employees 25,176 13,823 9,255 6,363 6,127 5,048 4,609 3,796 3,487 3,451

SOURCE: INS, Finance Ministry, Deloitte Top 500

Growth and privatization promises

There are still many reasons for optimism over attracting foreign investment. A major one is growth potential, which Romania recently demonstrated, taking everyone by surprise – companies, analysts and authorities alike – with GDP growth of 4.4 percent in the third quarter of this year.

“Then, following the agreement with the IMF, there is the significant openness of the Romanian State to privatizing big companies in energy, communications and transport, which will attract the attention of the largest investors in each industry,” said Milcev. He pointed out that Romania has also managed to avoid the bubble of sub-prime loans, so that neither the sovereign nor the individual debt is comparable to that of the countries that are in difficulty at the moment.

“An important incentive for foreign direct investment in emerging economies such as Romania is a significant increase in the number of middle-class consumers. Consumer goods manufacturers and service providers should be in a position to respond to rapid changes in consumer preferences and demand structure.

But the companies that will meet the challenge will be those able to face the volatility of capital flows,” said Milcev.

Macro challenges for investments

The challenges are both internal and external – some are out of control, while others require a consistent and coherent legislative response.

The main outside threat at the moment is the impact of the sovereign debt crisis in the Euro zone. In a worst-case scenario – multiple defaults, banks in freefall and a severe recession in Europe and the United States – Romania would probably have to adjust its monetary and fiscal policies. “A number of measures have

Pachiu & Associates Bound for Excellence This year you celebrate your 10 years’ anniversary.

How have your vision and values change over the years?

Laurentiu Pachiu Starting the firm was a big step in my career as well as my life. My vision was then and still is that of a team of great people, who are connected just like members of a family, through common values and objectives, but who are also great lawyers, cooperating for offering clients the best legal services there can be.

After these 10 years I am happy to be able to say not only that our vision and values haven’t changed, but also that they are shared and carried further by my colleagues at this firm. Thus, I can full heartedly say about us that we are a firm in which people are bound by excellence, just as links in a chain, depending on each other and working as one not only for the satisfaction of our clients, but also for our own.

You B.E.L.I.E.V.E. in a purpose. Times have changed but Pachiu & Associates’ purpose did not.

How is it so?

Andrei Dumitrache Times have indeed changed, especially during the last years.

Asking the question if and in what way we have changed came only natural at some point in the process. Renewing our brand and image seemed as a practical enough test in this regard. This is why we have not limited the process to only changing a logo and a web page, but we have gone deeper, investigating our very core values and philosophy. B.E.L.I.E.V.E. was the result of this long and thorough process of introspection. Who knows us well enough knows also that B.E.L.I.E.V.E. is only a new (and perhaps nicer) way of saying the same things we have been standing by from our very beginning.

Becoming the only Romanian firm accepted as member of the reputed law firms network Primerus was a great honor after a selection process which lasted for almost a year. We are proud to have met all the acceptance criteria, especially since most of them were not necessarily about size of business or number of lawyers, but about integrity, quality, and personal values of our lawyers.

Renewable energy trends: bubble or double digits?

Delia Vasiliu The renewable energy sector has won an important place within the Romanian energy market. Exponential increases have been registered in both the installed capacity of the renewable energy projects and the volume of investments affected to this field. The roll of renewable energy imposed by the European Union and accepted by the Romanian authorities is based on aspects related to environment protection and on elements pertaining to the energy security of the European Union, in its attempt to reduce the dependency from Russian gas. According to the official documents, the Romanian authorities intend to subsidise this field with approximately EUR 20 billion within the following years. Considering the development structure of the renewable energy field, the interest manifested by the clients for new projects or for diversifying their existing portfolio in Romania and the new improved renewable energy support scheme, we are optimistic in respect of the prospects of renewable energy.

Is Real Estate getting real?

Ana Maria Goga Real estate is one of the most important fields of investment, not only in Romania, but in Eastern Europe in general. Ever since the crisis started, analysts in the field stated that real estate is blocked. And when things started moving, the rumor of a new crisis has begun shaking the views. Despite all this perceptions, the real estate market started moving, especially if we talk about leases. It this context, it is important to understand that whomever wants to invest needs to be connected to dayto-day economy conditions, including prices and power of development of your future clients. As for 2012, although some say the worst is yet about to come, the new law permitting foreign investors buy land in Romania without needing to be a legal person, starting with 1st of January, will reawaken the appetite and courage for investment.

Why best times for some and worst for others to invest?

Alexandru Lefter Recent times marked a new attitude towards investments and shaped new economic realities. While the economic crisis became an excuse for some to put investments on hold and to minimize losses, for others offered a palette of opportunities undreamed of, couple of years ago. Strategic investors, also having the benefit of available funds, dared to expand or develop new, not necessarily with a high return rate, but with a sound promise of development, like green energy, agriculture etc. While everybody wants profits out of their investments, we all have to consider a factor which cannot be confined in specific parameters: the risk! At the end of the day, a durable investment is a precise assessments of the risks and an at least temperate attitude towards speculation.

4-10 Muntii Tatra Street, 5th floor, Bucharest 1, RO-011022, Romania Tel.: + 40 (21) 312 10 08 Fax: + 40 (21) 312 10 09 E-mail: office@pachiu.com, Web: www.pachiu.com

investment map Clearly, Romania would not have developed at the same rate without foreign investments and, moreover, its growth potential on the medium and long term depends largely on the resumption of foreign investment, along with a greater orientation of Romanian companies towards international markets.

According to data presented by the World Bank, the annual growth in value added produced by foreign companies in Romania between 2003 and 2008 was only 2.6 percent, while for local companies the increase was 5.9 percent.

On the other hand, foreign companies in Romania had the lowest annual growth in value added in Central Europe. The Czech Republic (4.3 percent), Poland (12.4 percent), Slovenia (10.1 percent) and Estonia (2.9 percent) all recorded higher rates.

already been taken, but the main vulnerability remains, because of the dependence on exports to developed countries and their investments on the local market,” added Milcev.

According to the latest Ernst & Young survey of financial directors around the world, 11 percent of companies intend to invest significantly in Romania over the next two years. If the economic situation worsens globally and regionally, many of these firms could limit their planned investments here.

Domestic demand in the Euro zone is likely to be constrained in the medium term by fiscal austerity and interest rate rises by the ECB. It is important to anticipate where growth may come from in the medium term. For many Euro zone countries, exports will provide a key path to recovery, enabling them to benefit from strong demand in emerging markets.

Value added: the buzzword

“An incentive for FDI in emerging economies such as Romania is a significant increase in the number of middle-class consumers,”

Possible exits

Among the foreign investThe value added created by ments in Romania are some foreign companies in Romavery large ones, but overall nia is lower than that of local national reliance on certain companies, and the lowest in industries is limited.

Central Europe, a fact which Companies have a comreveals that such firms have prehensive, global approach not made a large contribuand regularly review their Alexander Milcev, partner Ernst & Young Romania tion to the national economy, network structure, with Overall, foreign companies involved in said Donato De Rosa, senior economist at the decisions to relocate based on multiple facWorld Bank, recently. production use many imported assemblies tors that influence the total cost. and components, but here as well things are “We could see the relocation of some “Both Romanian companies and foreign firms in Romania are less productive than gradually changing, either because their for- production from Romania, but this fact is in other European countries, but local firms eign suppliers have also begun to move their not necessarily related to local issues; what have registered a faster increase in productiv- operations to Romania, or they are beginning is important is to ensure that we continue to ity than foreign companies. This means that to use a higher proportion of Romanian com- attract new investment,” said Belciu. ponents in an effort to optimize costs.

Currently, most fears center on Romaforeign investments made in mature sectors of the Romanian economy have produced “We estimate the total value added of nia’s interdependence on EU member states the lowest value added in Central Europe foreign companies will increase not only by and the local impact of possible imbalances (the Czech Republic, Poland, Slovenia, Esto- greater productivity, but also by extending in the Euro zone. nia),” said De Rosa, at a seminar on economic “There are still some domestic challenges the value chain to cover Romanian compoissues.

– like developing transport infrastructure, the nents,” said Belciu.

Exports per capita follow large investments County Population*

Arges 640,000 Constanta 722,000 Cluj 690,000 Sibiu 425,000 Brasov 597,000 Timis 678,000 Vaslui 450,000 Tulcea 247,000 Teleorman 402,000 Harghita 324,000 Braila 360,000

Number of Percent employees** 126,000 20 174,000 24 188,000 27 106,000 25 149,000 25 194,000 29 50,800 11 40,300 16 48,700 12 60,900 19 66,200 18

* For July 1, 2009 ** For January 2011 *** Data for 11 months

28 The Diplomat December 2011

Exports 2010 (mln. euro)*** 3,270 1,586 2,540 1,331 1,506 2,776 138 280 126 228 252

Exports per capita (euro) *** 5,109 2,196 3,681 3,131 2,522 4,094 306 1,133 313 703 700

SOURCE: National Institute of Statistics, ZF

investment map need for calibration of the education system to meet market demands and the simplification of bureaucratic procedures for the business environment,” added Milcev.

Moreover, confidence among Central Europe’s Private Equity (PE) professionals declined in the six months between April and October more sharply than at any time since the bi-annual Deloitte Central Europe Private Equity Confidence Index was first launched eight years ago in 2003.

second-lowest level the survey has seen.

“When investors lose confidence, businesses and economies suffer. We have seen an abrupt and decisive change of sentiment over the last six months. This suggests that the events of 2008 are still fresh in many minds and any recovery we have witnessed over the last two years has been extremely fragile,” said Garret Byrne, Deloitte partner and M&A transaction services leader.

Who’s expanding?

This year, Yazaki, the top global manufacturer of circuit boards for the car industry, officially opened a plant in Caracal (Olt county), following an investment of EUR 4 million.

The site will supply electric parts for the new model to be produced by Ford. The Caracal factory became operational in March and will reach its maximum output in the second half of 2012, when the staff will increase from 500 now to 1,000, turning it into the second largest Japanese investor in Romania, according to Jorge Damasceno, Yazaki Romania CEO. Meanwhile, Continental Tires Timisoara has also increased its number of employees, from 200 in 2000 to more than 1,600 now.

In 2010 the company announced the start of the Master Batch processing line project, which generated around 200 new jobs.

“Romania has a legacy of a very good education system, but why aren’t we developing many Silicon Valleys, niche manufacturing clusters?”

Hein van Dam, partner in charge of Balkan region financial advisory at Deloitte

According to Deloitte, investor confidence had steadily grown over the last two years to reach a post-crisis high in April this year.

Now, however, more recent fears regarding a possible double-dip recession and the future of the Euro zone, alongside slowing growth in Poland, the Czech Republic and Slovakia, have driven it down again to the

“With the expansion project scheduled to start next year, the company will also create another 300 jobs,” Pedro Carreira, GM at Continental Tires Timisoara, told The Diplomat – Bucharest.

Continental started its Romanian operations in 2000 with a greenfield investment in a tire plant in Timisoara.

Within 10 years, the group had invested

Value chain positioning • We will continue to be in the physical chain (agriculture, manufacturing delocalization) • We might become suppliers of low- to medium-skilled labor • Qualified IT workers will keep us in the processing chain • Knowledge chain – see Dacia’s experience at Titu • Clusters should show a transformational effect • We will continue to offer capability, mainly in the physical chain • How much we offer in terms of the ability to combine business capabilities will be the challenge SOURCE: Florin Pogonaru, president of the Association of Romanian Businesspeople

more than EUR 220 million in the factory.

“Next year we intend to invest another EUR 40 million in expanding the Timisoara plant,” said Carreira.

More broadly, Romania has seen a strong improvement in the region, increasing its share of companies in the Top 500 Central Europe from 6 to 8 percent (38 companies, up from 33 in 2010).

The combined revenues of the largest firms in Romania amounted to EUR 37.49 billion at the end of last year.

“This year’s findings reflect a business community focused on increasing revenues,” said George Mucibabici, chairman of Deloitte Romania.

“The financial performance has been affected by the crisis of 2008 and 2009, two years when companies focused on cutting corporate fat, to create more streamlined and efficient organizations. As a result, almost 80 percent of Central Europe’s 500 largest companies earned higher revenues in 2010 than the year before, when just 16 percent did so.” ■

Romania’s economic footprint Year GDP Exports

2000 60 bln* 12 bln 2008 138 bln 35 bln 2011** 125 bln 45 bln * All sums are expressed in euro ** Estimates

Dacia exports 50 mln 1.5 bln 4 bln

Nokia exports - 380 mln 2 bln

Vegetables exports 12 mln 39.6 mln 42 mln

Milk and cheese exports 30,000 1 mln 4 mln

Wine exports 19 mln 16 mln 15 mln

Furniture exports 483 mln 1.1 bln 1.2 bln

**Nine-month results for 2011 SOURCE: Agriculture Ministry, National Institute of Statistics, ZF

30 The Diplomat December 2011

LIFE IN MOTION

Business on the right track Eurosport DHS brand story began in Petrosani in 1999. The lack of manufacturers and distributors on the Romanian bicycle market determined Chinese investors to choose Romania. Romania approaching Central and Western Europe, very high potential market and safety of their investment convinced Chinese investors to put bases of what was to become one of the largest bicycle factory in Romania.

Currently Eurosport DHS invested in Romania more than 20,000,000 Euro.

DHS among the first manufacturing company in the country. The National Council of SMEs awarded Eurosport DHS first place in bycicle production, three times in a row.

After a two year collaboration and confident in a partnership for the future, the German group Prophete took decision to acquire 40% of Eurosport DHS shares , contributing with capital and experience earned during 100 years in Germany.

Promoting outdoor sports is Eurosport DHS number one priority. Company does it by augmenting the awareness on the importance of bicycles in people’s lives, valuing and rewarding performances and getting involved in the social life of local community. Eurosport DHS group will invest more in educating the consumer to ride the bicycle to a healthier life, as slogan “Life in motion” suggests.

Eurosport DHS is an ISO certified company and products are manufactured at European standards by qualified staff.

Eurosport DHS made bicycles are the perfect combination of high-end quality mechanical parts, futuristic frames and wheels, and eye catching designs and colors. The wide range of products and services together with proven seriousness and professionalism propelled Eurosport

Eurosport DHS has over 600 dealers in Romania and a share on bicycle market of 75% but all of Eurosport DHS products may be found in retail locations as well. Meeting the European quality standards, Eurosport DHS products are being exported to 17 countries in Europe.

Eurosport DHS sponsored the first stage of Romanian Cycling Tour in Deva, the most important Romanian cycling event.

In addition, Eurosport DHS has constantly supported Blue Jersey - Best Romanian

Cyclist for five years now. Starting 1st of September 2010, DHS Tibiscus Team - part of university sports association Tibiscus Cycling Club Timisoara, became officially the competition cycling team of Eurosport DHS. Every year Eurosport DHS organizes two important national contests: “DHS CUP” in cooperation with Ministry of Education, Research, Youth and Sport and Ministry of Administration and Interior - the most important bicycle riding skills contest and road traffic education for school children and “DHS CORVIN MTB MARATON” aiming professional riders.

The latter project was started this year in association with CS Silver-Fox, DHS Tibiscus Team, Hunedoara City Council and City Hall and involved more than 450 professional cyclists.

Eurosport DHS success story will go on and keep the promise of promoting cycling as a healthier way of life. In 2012, “DHS CUP” will develop further and extend its presence from local to national while “DHS CORVIN MTB MARATON” will position itself as one of the most important national and European contest for professional bikers. Community programs like free bike sharing or giving away 3000 bicycles to children from disadvantaged villages to ride to their schools will also be on track for next year.

Eurosport DHS Address: Santuhalm street, no. 35A, Deva, Hunedoara county Phone: 0254 210001 / 0372546910; Fax: 0254 210004 / 0372546911 E-mail: office@dhsbike.ro

The Recycling Patrol A program for environmental education and ethical behavior (2011-2012) The Romanian Association for Recycling RoRec has implemented the Recycling Patrol project, in partnership with local city halls and County School Inspectorates from the cities where RoRec already signed partnerships with as part of during its collection centers’ program.

The program translates into a waste electric and electronic equipment (WEEE) collecting campaign and aims to create a coherent infrastructure for these types of wastes.

It is currently running in Alexandria, Bistrita, Tulcea, Calarasi, Valenii de Munte, Brad, Hunedoara and Timisoara.

The Recycling Patrol is an educational program for environment protec-

32

tion, centered on WEEE collection and recycling in educational institutions, that will eventually contribute to reaching the target imposed by the European Union of collecting 4 kg per capita every year.

Initially the project started in Timisoara, as a pilot city, at the end of April this year, involving over 70 educational institutions with over 22,000 children enrolled that collected, in a very short period of time, over 1,300 kg of WEEE. In the case of kindergarten and schools, batteries were collected in the largest quantities, while in the cases of high schools and colleges EEE were the most popular collected wastes.

The project will take place in preschool and pre-university educational institutions between November 15, 2011

and June 15, 2012.

Through this program, the organizers facilitate a WEEE collecting system that is accessible, thus encouraging the habit of selective collecting. In addition to that, the program has a strong educational component, through which it helps pupils understand some of the causes for environment pollution and makes them aware of the fact that reducing pollution depends on each one of us. Moreover, children can become ambassadors of an ecological message and therefore models for the people around them. Even if they are very young, they will communicate in their families information they’ve learned about in school and they have the power to “educate” their parents in the sense of a responsible ecological attitude.

www.rorec.ro/ro/patrula-de-reciclare www.facebook.com/patruladereciclare “We can say that the new generation has the ideas and the will necessary to help strengthen the correct ecological behavior,� explained Liviu Popeneciu, President of RoRec Association.

The waste management collection system for WEEE will be implemented in all educational institutions involved in the program, where WEEE collection kits will be installed (namely three cardboard containers for collecting small electric equipments, lighting bulbs/neons and batteries) provided by the RoRec Association. During the entire project, a team from the organizers will provide the coordinating teachers with the necessary information, will be responsible for taking over the WEEE from full containers

and will also be supplementing informative materials.

The coordinating professor will be the one that will distribute informational materials, will coordinate the program in his school and will initiate activities through which the message of selective collecting can reach the children’s neighbours and friends, and in the end will report his actions and results on the website of RoRec Association.

A premiere in this first edition of the Recycling Patrol is the creation contest for the poster of the next edition (which can be done in collage, drawing, painting, graphics, computer drawing etc).

The closing ceremony for the pilot project of the first edition of the Recy-

cling Patrol will be held in the middle of June, when the RoRec Association will award diplomas and special prizes during dedicated festivities in each of the cities participating in the program.

The organization committee will award the efforts of the most commutted educational institutions in the success of the project, both locally and nationally, for the largest quantity collected/pupil enrolled in the program, for the most active coordinating professor, and the best proposal for the Recycling Patrol poster.

Also, all the children enrolled in the program will receive participation diplomas during the awarding ceremonies at the end of the school year.

33

romanian post

Delivering change Challenged by a privatization attempt in 2007, huge losses, a record EUR 26 mln fine, and wary of breaching competition law, the Romanian Post seems finally to be delivering on its market, with a little help from the State’s international economic agreements. Now seeking a strategic investor to put its stamp on the service, the Romanian Post is shaking off the dust of the past and going head‑to‑head with its competitors.

By Magda Purice

M

ention of the state-controlled Romanian Post (Compania Nationala Posta Romana) often invites the question: how can a company with a monopoly record losses of about EUR 73 million in just two years? Specialists talk of two big drains on the coffers of the Romanian Post. First, the salary expenses. At the end of September the state company had 33,377 employees, a number which hasn’t decreased as much as expected.

Second, there were the expenses of external services such as security, transport, cleaning and others, which had become a heavy burden on the postal service. According to the Romanian Post’s 2010 annual report, the company has cut its expenses for security services by 60 percent, after reducing the number of branches staffed by security guards as a result of the renegotiation of rates.

Although the firm has the largest market

share, especially for mail services, it was late to the party on the courier and fast-delivery segments, which left room for courier companies to take a good bite out of this sector.

About 889 postal services suppliers have been registered in Romania, representing growth of over 1,000 percent since 2002.

Still, besides the current restructuring operations assumed by the company’s management, the recent years have brought other challenges for the Romanian Post, such as the record fine from the Competition Council, which is being contested by the state-owned company. And further tests lie ahead since October’s government decision to privatize the Romanian Post by offering a minority stake to a private investor.

Privatizing the Post

Officials from the Communication Ministry (MCSI) told The Diplomat – Bucharest that

Romanian Post in figures

2008 2009 2010 2011**

Turnover* 380.5 341.8 327.8 225.8

Profit/Loss* 1.24 -43.8 -28.8 -

Total expenses 395.4 397.5 369.2 -

No. of employees 35,576 35,520 34,731 33,377

* Sums are expressed in million euros **Nine-month results for 2011 SOURCE: Finance Ministry, Romanian Post

34 The Diplomat December 2011

they are looking for a strategic investor from the postal segment. Once the candidate is found, the State will hold at least 52 percent of the Romanian Post while the other shareholder, the Property Fund, will remain with at least 17 percent. Currently, the MCSI controls 75 percent of the company.

On the medium and long term, the State has not ruled out an exit from the Romanian Post, say officials. According to the MCSI, the investor, who will own up to 33 percent following a share capital increase for the Romanian Post, will be selected by April 2012 and will also appoint the company’s management.

So far, representatives of postal services providers in Austria, Belgium, Germany, Italy, the UK and Sweden have shown interest in the Romanian Post. Applications must be submitted by January 2012, the deadline set by the MCSI. But this is not the first time. In 2007, the Romanian Post was again to the subject of privatization talks, when MCSI representatives acknowledged that the national postal service was beleaguered by bureaucracy and cost-inefficiency. At that time, the Austrian Mail Service was interested in acquiring its local counterpart, but the privatization consultancy was suspended in the absence of a coherent strategy for the company’s reorganization. Now, with the IMF’s help, the Romanian Post is on the list with other “must-be privatized” companies in need of majority or minority stakeholders.

romanian post Branching out

Dumitru-Daniel Neagoe, the president and general manager of the Romanian Post, whose mandate will expire on December 31 this year, says the reorganization stages of the postal service, as agreed with the IMF, included 70 layoffs, from a total of 33,377 employees, according to company data made public in September.

“I underline the fact that my goal, as manager of the company, is to seek efficiency and flexibility in organizing the internal structure of Romanian Post,” promised Neagoe.

But no other workers will go this year, according to the manager. The agreement with the IMF which stipulated the elimination of 1,400 jobs does not equate to the same number of employees getting their marching orders, since many of the positions were already vacant.

Neagoe said that the company’s reorganization strategy includes two aspects. The first is the restructuring of the branch network by reducing the number of units through merging and restructuring several management positions, which has already happened.

The second element is operational restructuring, by diversifying the services offered to customers. The postal service has already

started negotiations with different financial partners and is working on an agreement with the Romanian Lottery.

Partners for the Post

Under its current business strategy, the Romanian Post plans to align itself with its market, which has to be completely liberalized by 2013.

As Neagoe told The Diplomat – Bucharest, the company is looking towards securing and retaining its traditional mass clients but is also trying to make better use of technology and the online environment. Therefore, the old-fashioned image of a Romanian post office will be replaced by a modern one, if the manager’s expectations and plans come to reality.

“We are focusing on implementing e-commerce services, digital delivery services, direct marketing and the development of financial and banking services that we provide to our customers,” said Neagoe. For several years, the Romanian Post has been delivering these kinds of services to its customers, through partnerships with private financial, insurance and banking entities. “We are currently negotiating our entrance onto the financial-banking segment with several banking institutions,” added the GM.

Moreover, the Romanian Post is also planning to deliver mandatory insurance services by signing a contract with a brokerage agent as well as forming a partnership with the Romanian Lottery. According to the manager, the portfolio of services offered by the Romanian Post could also comprise the re-launching of fast mailing and door-to-door courier services.

Addressing IMF concerns

The Romanian Post GM told The Diplomat – Bucharest that the recent decisions taken by the management have started to show results.

“We plan to continue the restructuring process, along with attracting new resources to deliver revenues for the company. The main priorities for reorganization and making the company’s activities efficient are increasing revenues and reducing operational costs.” At the beginning of last month, representatives of the MCSI and Romanian Post met officials from the IMF, World Bank and other EU officials in order to evaluate the Romanian Post’s progress.

The service is the country’s largest employer, with over 33,000 workers, and also operates the largest distribution network of almost 5,846 branches and 16,000 postal boxes countrywide. ■

35

couriers

Couriers seek to dispatch rivals post-haste After two hard years of coping with the economic gloom and several bankruptcies in 2010, managers of the largest courier firms active locally told The Diplomat – Bucharest how much the market - estimated at EUR 200 million for this year - has slowed, what their business expectations are and where the growth potential opportunities may pop up.

By Magda Purice

C

ompared with last year, when the local courier market saw several important M&A transactions, 2011 is expected to be defined by the consolidation of business and customer portfolios, through pricing policies, greater operational capacities and, at least, some investment in online infrastructure. While some players, such as TCE Logistica, one of the largest local competitors, tentatively predict growth of between 5 and 10 percent for this market in 2012, other companies think that the courier segment will slow down at least for this year, with next year’s outlook too uncertain to call. Meanwhile Fan Courier, one of the major actors on the Romanian market and the local leader for domestic “next day” deliveries, currently puts the courier market at EUR 230 million.

Some things are clear. The market has lost several tens of millions since 2008, when it was worth around EUR 250 million.

A company’s turnover increase does not represent a real business boost if the profits barely come from volumes, due to lower rates, said managers of DPD Romania.

Furthermore, the courier scene is much changed from 2008. The post-crisis period brought several bankruptcies, with the most famous cases Curiero, Roexpres and RoCourier, while other companies have been acquired by larger multinational groups over the last three years. In 2008, the German group DHL acquired 36 The Diplomat December 2011

the local courier Cargus, in a transaction estimated at the time at EUR 50 million.

In the same period, the largest worldwide courier UPS, listed on the New York-stock exchange, snapped up Trans Courier Service (TCS), which operated on the local market as UPS’s authorized services provider. 2008 also brought one of the largest rebranding campaigns and entries on the local courier market, when GeoPost Yurtici Kargo acquired the majority stake in Pegasus, which changed its name to DPD Romania.

The changes shaped the current landscape of a local courier market revealing a clear structure: the big league of multinational and local groups, a smaller and fragmented segment of Romanian couriers and the state-owned competitor, the Romanian Post. Each is trying to carve out a larger slice of the overall market, whether mail or parcel post.

200

million euro is the estimated value of the local courier market in 2011

Market share rush

The national postal operator remains even now the leader for mail services, holding some 90 percent of this segment, but controls less than 13 percent of total parcel post services, where international players are more active. As the Romanian Post seems to be playing the same game as other companies, which are attempting to poach each other’s market share, existing courier firms are following the market moves and perceive the Romanian Post as a serious and respected competitor. According to Gian Sharp, managing director for Romania and Bulgaria at DHL Express, one of the largest players on the local market, the delivery market is not set to change greatly in the short term. “We are not expecting a significant increase in the local market for the next year, predicting a similar value of EUR 200 million. Nevertheless, all the players are targeting a market share increase, so we might see a different evolution from company to company,” Sharp told The Diplomat – Bucharest. The firm, which in Romania targets especially international delivery services, which make up 90 percent of the local operations, expects an 8 percent increase in revenues for this year and a 15 percent hike in shipments on the international segment.

Elsewhere, a significant competitor, Fan Courier, a 100 percent Romanian-

URGENT CURIER este o companie cu acționariat românesc, creată pentru a oferi cele mai bune servicii de curierat local, național și internațional, precum și semicurierat. Suntem în permanență la dispoziția clienților noștri, toți cei care au nevoie de servicii de curierat pe teritoriul întregii țări sau oriunde în lume, adaptându-ne întotdeauna la cerințele specifice ale fiecărui client prin dezvoltarea unui serviciu personalizat nevoilor acestuia. Provocarea de zi cu zi a echipei noastre constă în căutarea continuă a modalităților prin care putem oferi clienților noștri servicii de calitate superioară și în introducerea de sisteme noi și inovatoare. Astfel, ne propunem să ajungem și să ne menținem lideri pe piața din România.

Pentru compania URGENT CURIER succesul pe piață este reprezentat de satisfacția clientului. Din acest motiv considerăm că este esențială cunoașterea și înțelegerea nevoilor clientului, pentru ca apoi să le putem satisface și chiar depăși. Pentru a atinge acest țel, echipa URGENT CURIER formată din peste 600 de angajați și o flotă cu mai mult de 800 de autoutilitare, tratează cu aceeași importanță fiecare client care apelează la serviciile sale, satisfacția finală reprezentând rezultatul unei munci asidue, care pune pe primul loc calitatea serviciului prestat. Noi punem accent pe siguranță, flexibilitate, promptitudine, profesionalism și responsabilitate.

URGENT CURIER asigură identificarea și transibilitatea comenzilor pe toată durata realizării lor prin mijloace specifice, ținând sub control o identificare unică pentru fiecare comandă și client.

URGENT CURIER se obligă să livreze în sistem „door to door” de luni până vineri toate expedițiile într‑un termen de maxim 24 de ore de la preluare și un maxim de 48 de ore pentru expedițiile preluate în zilele de sâmbătă.

Cu mai mult de 100 de filiale la nivel național, punem la dispoziția clienților noștri un pachet format din cele mai bune servicii de curierat rapid și servicii anexate: •

Serviciul SMS ALERT;

•

Serviciul EMAIL STATUS;

•

Aplicația URGENT Online;

•

Livrări și colectări în peste 5.500 de localități fără a percepe kilometri suplimentari;

•

Sistemul de monitorizare expediții prin GPS în timp real;

•

Serviciu traking expediții;

•

Serviciu calcul și raportare costuri.

couriers

“The market has slowed down. As a trend, there was an exchange of parcel post services between the Romanian Post and market players,” Lucian Aldescu, CEO of DPD Romania

owned company with a market share of 24 percent in 2011, says the overall value of the local market could reach EUR 230 million this year. “We can’t expect to see the spectacular evolution from 2006-2008 again. This year was an unusual year, economically speaking, but this segment is going to register growth,” Adrian Mihai, business development manager at Fan Courier, told The Diplomat – Bucharest.

The company, which was formed 13 years ago and is controlled by three Romanian businessmen, Felix Patrascanu, Adrian Mihai and Neculai Mihai, has 108 working points countrywide and operates doorto-door services with a fleet of 1,500 cars, entirely owned by the firm. Fan Courier employs over 2,500 people and has upped its market share by 2 percentage points since 2010. It has made around EUR 45 million of investments in Romania since 1998.

“From what we have noticed in the last few years, the market has slowed down.

As a trend, there was an exchange of parcel post services between Romanian Post and the other players on the market. We also increased the international segment by taking over parts of the Romanian Post. Almost 50 percent of our business is represented by international courier services,” Lucian Aldescu, CEO of DPD Romania, told The Diplomat – Bucharest.

Company representatives put the local

courier market, excluding the Romanian Post, at around EUR 180 million, slightly below the estimations of other companies operating on the market, which suggest a value of EUR 200 million or even more, EUR 220 million. DPD is the master franchisor of French group GeoPost and operates 110 franchises locally. From 2008, when it attained a share of 4 percent on the Romanian market, the company reached 7 percent in 2011 and has invested EUR 2 million since it started to operate locally in 2008, when it acquired Pegasus. “For this year, growth of about 5 percent is expected on the overall courier market,” said Aldescu.

Sorin Sofian, CEO of TCE Logistica, has similar expectations. The firm is one of the largest businesses operated by the Romanian businessman Octavian Radu, within his group, RTC Holding. “It is very hard to put forward any figures for next year, as there are many unknown variables in the local and global economy. If nothing extraordinary happens, we might see growth of between 5-10 percent,” Sofian told The Diplomat – Bucharest.

Investment policies

Last year, the courier division TCE Logistica started to operate a new service, Worldwide TCE, offering international cargo and courier services which, according to Sofian, now reach EUR 1 million in value. Delivering services and products to almost 2,000 customers monthly from industries as varied as financial, automotive, furniture and food retail, TCE Logistica’s investment policy embraces the “logistics one stop shop,” philosophy, according to Sofian. The company includes eight different operational divisions, such as fast courier, express courier, pallets distribution services and an expedition house, and it made a turnover of EUR 19.5 million in 2010.

For this year, Sofian says the company, which employs 1,100 people, is planning 10 percent turnover growth on last year. Since 2003, when the firm was established in order to tap into the potential of the market, TCE Logistica has been transformed into a holding with investments exceeding EUR 20 million.

The company operates two large hubs in Romania, in Bucharest and Brasov, and two smaller centers, in Cluj and Bacau, which include deposits, courier and cargo stations for TCE Holding’s divisions. For this year, Bucharest is the largest revenues generator, contributing 30 percent of the volumes, but, according to the TCE Holding manager, the western part of Romania has started to narrow the gap, with Timisoara making up 7 percent of the total volumes. The company has also increased its number of clients this year, by 7 percent, due to new business lines such as TCE Worldwide and postal services.

The difference between the local and international players on the courier market also consists in the development needs and the necessary tools to meet those needs. For instance, while TCE Logistica develops domestic infrastructure to better meet its customers’ delivery needs, DHL Express looks abroad and thinks of new capacities to meet the international delivery needs of its clients.

In order to consolidate its operations in

“The local courier market shrank 25-30 percent from 2009-2010, after which it stabilized. The prices have dropped significantly in the last year,” Octavian Badescu, founder and CEO of Sameday Courier

38 The Diplomat December 2011

couriers

“We are not expecting a significant increase in the local market for the next year, predicting a similar value of EUR 200 million,” Gian Sharp, managing director for Romania and Bulgaria, DHL Express

Romania, DHL Express will operate a new aircraft from Bucharest as of next year, “which will significantly improve cut-offs in Bucharest and in the eastern part of the country,” said Sharp. At the beginning of this year, DHL International Romania launched a new cargo airplane, operating in western Romania, and a new operational gateway in Cluj. “Due to this investment, DHL Express ensures the best cut-off and delivery times for its customers from western Romania,” said Sharp.

Also, at the company’s Bucharest hub, the sorting line at Otopeni Gateway was reengineered this year. Currently, DHL is making a EUR 2 million investment in a new shelved vehicle fleet. Last year, the firm posted a turnover of EUR 36.1 million in Romania. As of October, 460 people are working for the company in its 50 hubs countrywide.

Meanwhile, DPD representatives said that for next year, the company is aiming for growth of 15 percent and investments of EUR 800,000. “These investments are planned for the next year and could take two-three years. They target the improvement of operations and technology,” said Aldescu. DPD Romania, one of the top five local parcel operators, reported a 25 percent business hike for the first three quarters of this year, after attaining a total turnover exceeding EUR 7 million in 2010.

Pricing policies

“For 2012, we don’t plan to decrease prices too much below the level of 2011. The turnover growth estimated for 2012 is 15 percent, a lower level than this year.

It follows the market trend, which also seems to be slowing,” Alin Gherman, commercial director of DPD Romania, told The Diplomat – Bucharest.

“The growth of 30 percent in volumes resulted from our policy to cut prices, but for the future, and we plan to earn more from smaller volumes,” he added. For DPD Romania, Bucharest makes up 50 percent of the total volumes delivered by the company.

According to Octavian Badescu, founder and CEO of Sameday Courier, a company established in 2007, the Romanian courier market shrank 25-30 percent from 2009-2010, after which it stabilized, Badescu told The Diplomat – Bucharest.

“There is a direct link between the economy and logistics, especially related to transportation. The Romanian market is extremely competitive, and the prices have dropped significantly in the last year,” he added. With several large players on this market, the slices of revenue gained by the minnows are very fragmented.

“On mature markets, DPD as a group registered growth of up to 10 percent.

Also, Russia, which is a new market for DPD, registered a record growth of 30 percent. “We are market leaders in the Czech Republic and Poland, where we make a EUR 100 million turnover. Hungary is the only country where DPD comes second on the market,” said Gherman. The Baltic countries are the most affected by the crisis, according to the manager.

“Today, the market is different compared with 10 years ago, due to online technology. We are still at the beginning with the online market in Romania. The

exchange of mail is falling due to e-mail, and the courier market is growing due to online shopping,” Gherman explained.

According to Ciprian Pulpa, executive manager of Fastius Curier, the competition coming from the large international players has been felt more keenly in the last few years.

“The courier market has faced structural changes in recent years, with foreign entries on the local market and international companies consolidating operations locally. This year, we predict more growth than in previous years and a more mature market could form in the near future,” Pulpa told The Diplomat – Bucharest.

Fastius Curier, which was formed in 2002, operates mainly b2b services. The company has a diverse client portfolio, from the IT, pharma, telecom, finance and retail segments.

For another player on the local market, Mailman, which was established in 1997 and operates only on the domestic segment, 2011 will bring a drop of ten percent compared with last year’s values for the overall courier market.

“The last years have brought a continuous drop, with customers being more price conscious and using courier services only for urgent needs,” Cameliu Lungu, founder of Mailman, told The Diplomat – Bucharest. ■

“We can’t expect the spectacular evolution of 2006-2008 again. This year was an unusual year, but the segment is going to register growth,” Adrian Mihai, business development manager, Fan Courier

39

Romanian Senate concerned about the legal framework and the situation regarding the management of waste electric and electronic equipment (WEEE) On October the 18th 2011, the Commission for Environment and Spatial Planning of the Romanian Senate organized a round table on the transposition of the waste electric and electronic (WEEE) Directive (2002/96/CE) and its impact on the society and business environment.

The meeting enjoyed the participation of

the Minister of Environment, President suspension of their activities. The existof the Senate, Presidents of the Com- ing legal framework may also lead to missions for Environment and Spatial regulations imposing financial penalties Planning from the Senate and Chamber for the industry which may reach 20 milof Deputies, senators, deputies, represen- lion Euro. tatives of the household appliance and After the official opening of the meetrecycling industry. It was organized at ing, Mr. Catalin Gurau, the director of the the initiative of the Senate’s Commission Association of the European Household which considers that the Romanian ParEquipment Manufacturers in Romania liament should be involved in the waste – CECED Romania had a presentation management thematic. This involvement regarding the current problems of the is particularly necessary because the industry and the difficulties of the WEEE legal framework on WEEE was estabmanagement process. lished through a Governmental Decision Thus, the main weak points of the (1037/2010), bypassing the parliamentary debate and it transfers unrealistic collec- existing Romanian legal framework were tion targets exclusively to the produc- presented. These are related to collection, ers of electric and electronic equipment treatment monitoring of the WEEE flows imposing penalties that may lead to the and the registration of the producers.

The Minister of Environment and Forest, Mr. László Borbély promised that he will invite the representatives of the industry for a discussion regarding the improvement of the legal framework and promised to investigate the measures taken by the authorities to combat illegal collection, dismantling and export of waste

40

Liviu Popeneciu, the president director general of the Romanian Association for Recycling – RoRec, the industry’s collective system for WEEE management, presented the main difficulties regarding the collection and recycling. He explained that a major problem for a normal functioning of the system is the illegal collection of WEEE, especially of the white goods (refrigerators, cookers, washing machines) as scrap metal by unauthorized operators. These are further recorded, traded and treated as scrap metal not as WEEE which contributes to the release of hazardous substances in the environment (eg: CFC’s from old fridges). The fact that they are not registered and monitored means that they are not taken into consideration as quantities collected and treated

Theoretically if the local authorities establish collection points with zero performance as regards the collected quantities, they are exonerated from any responsibilities. The Governmental Decision 1037/2010 has no provisions regarding the identification and sanctioning of the illegal collection of WEEE either.

Additionally the responsibility for the collection target was entirely transferred to the producers of electric and electronic equipment and their collective organizations under the threat of the suspension of the activity.

As regards treatment, the GD 1037/2010 includes penalties only for the authorized recycling companies. There are no provisions for the illegal treatment of the WEEE. We are therefore in the absurd situation in which the illegal dismantling of WEEE can be penalized only by applying the provisions of the framework law on environment, with a fine starting from 5000 lei and no consequences on the activity, while missing the recovery target by 0,5% by the

authorized operators (e.g: achievement of 79,5% recovery rate instead of 80%) in penalized with a fine between 40 000 and 50 000 lei and a temporary suspension of the activity.

The GD 1037/2010 no longer includes penalties for the producers which are not registered which may have the following consequences: •

increase the unfair competition between producers who are fulfilling their financial obligations regarding the WEEE management and the producers who avoid this.

•

lack of financial resources for the management of WEEE.

Mr. Liviu Popeneciu, the president director general of the Romanian Association for Recycling – RoRec, the industry’s collective system for WEEE management, presented the main difficulties regarding the collection and recycling.

He explained that a major problem for a normal functioning of the system is the illegal collection of WEEE, especially of the white goods (refrigerators, cookers, washing machines) as scrap metal by unauthorized operators. These are further recorded, traded and treated as scrap metal not as WEEE which contributes to the release of hazardous substances in the environment (eg: CFC’s from old fridges).

The fact that they are not registered and monitored means that they are not taken into consideration as quantities collected and treated. This situation, corroborated with the stoppage of the programs for the stimulation of the one to one exchange (programs based on the necessity of a better waste management and the benefits related to the energy efficiency) lead to a sharp decrease of the quantities collected and treated through the channels

of the producers. If the current situation continues unchanged and the authorities are not increasing the efforts to combat illegal collection and treatment and to improve the legal framework in order to include clear responsibilities regarding performance and reporting for the local authorities and other actors, it is unlikely that the national collection target of 4 kg/inhabitant and year will be reached.

Taking into account the existing and predictable future legal framework this may expose the producers to arbitrary penalties up to 20 million Euro.

An additional risk of the illegal exportation of WEEE as scrap metal is the violation of the provisions of the Basel Convention on transboundary movement of hazardous waste (ratified by Romania through the Law 6 from 1991).

The Minister of Environment and Forest, Mr. László Borbély promised that he will invite the representatives of the industry for a discussion regarding the improvement of the legal framework. He also promised that he will investigate the measures taken by the authorities to combat illegal collection, dismantling and export of waste and will communicate the results to the participants.

Mr. Marius Costache, the general manager of Green WEEE Buzau (the biggest Romanian WEEE recycler) endorsed the statements of the previous speakers regarding the negative role of the illegal collection and dismantling confirming the urgent need for action.

Catalin Gurau, the director of the Association of the European Household Equipment Manufacturers in Romania – CECED Romania presented the main weak points of the existing Romanian legal framework: the collection of WEEE, treatment monitoring of the WEEE flows and the registration of the producers.

Advertorial

The Governmental Decision 1037/2010 establishes only apparent responsibilities for the local authorities regarding the collection of the WEEE from the households.

In reality there are no specific requirements regarding the performance of the collection activity.

41

business travel

“M

y wife worked in a corporation headquartered in Switzerland where the meetings were held in front of the office building on the grass.

She loved the idea and this was one of the inspirations when we started to develop our pension,” Emil Munteanu, owner of the fivestar guest house Arta Doftana in Valley Doftana, tells The Diplomat – Bucharest of the pension’s genesis.

The facility, which caters for both leisure and business customers, was built with an investment of EUR 1 million, with 20 percent of the sum coming from European funds. The location is suitable for leisure meetings or department team-building sessions.

“For example, last month a company came to hold an internal team-building.

We don’t have a conference room and I did that intentionally because I wanted to have a different approach. I think it’s much nicer to go out with your laptop in your arms and sit on the grass, or around the fireplace, so we are not stuck in conference standards,” says Munteanu, adding that he opted for something different because business tourism in Romania is pretty standardized.

Continental picture

Business travel still up in the air Worth around EUR 500 million in 2011, business travel in Romania is the only sector of the local hospitality sector that is efficient and on the up. Industry consultants and the managers of major airlines, travel agents, hotels and corporate associations tell The Diplomat – Bucharest what conditions are required for this segment to soar next year.

By Magda Purice and Roxana Cristea 42 The Diplomat December 2011

Which invites the question: is Romania truly a business destination? According to the latest study on tourism conducted by Romanian Commercial Bank (BCR), into the purposes of visits to Romania, 90 percent of foreigners said that they had come here on holiday.

This is more or less the case in Hungary, while, at the other end of the scale, Poland has a higher share of foreigners coming on business.

Austria, Croatia and Czech Republic have by far the highest numbers of foreign visitors, with almost 18 million for Austria, against 7 million for Hungary between 2006 and 2010, while Romania barely registered 2 million during the period.

Still, the statistics show that foreign visits to Romania increased by 6.9 percent in September 2011 compared with the same period of 2010, reaching almost 700,000.

According to the National Statistics Institute (INS), most of the foreign tourists came from European countries and almost half from the EU. Almost 33 percent of the total foreign visitors came from Hungary, while Italian and Polish travelers accounted for 10 percent and 5 percent respectively of overall foreign tourist numbers in September.

The average net occupancy rate was estimated at 28.1 percent for September this year, down 0.4 percent compared with September 2010.

business travel Downshift

In line with the overall economic downturn, tourism, including corporate travel, has been affected by changes in travelers’ habits, say representatives of tourism operators. “While three years ago if a group of businesspeople had a meeting in Frankfurt on Thursday, they flew out on Wednesday night and returned on Friday. So, for one meeting they stayed in the German city two nights. Now, they are leaving early in the morning and returning that night to save money. Before the crisis, people used to fly with traditional carriers; now they use both traditional and low-cost airlines. Also, they stayed at five-star hotels, now they choose three- or four-star facilities, and the business class segment has shrunk a lot,” Javier Garcia-del-Valle, executive vice-president and CEO of Happy Tour Group, tells The Diplomat- Bucharest.

Since the downturn started, tourism in Romania, like other sectors of the economy, has faltered considerably, according to major tourism companies in Romania. “The estimates that we have, and the best indicator

man carrier Lufthansa expanded its flight capacities in Romania, its representatives recently announced. The airline recorded a 20 percent hike in passenger numbers for flights to and from Bucharest, and expects a new record by yearend, according to Ofer Kisch, GM of Lufthansa Group for the CEE region.

The German airline announced a new direct flight, between Berlin and Bucharest, following the opening of a new airport in Berlin. The new direct route will have four flights per week from Henri Coanda International Airport in Bucharest. From the summer of 2012, Lufthansa plans to double the capacity for flights operated from Sibiu airport, from 7 per week to 14.

The cost-trimming that persuaded some businesspeople to take budget flights has improved the numbers of another airline on the Romanian market. Low-cost carrier Wizz Air transported 28 percent more passengers in 2011 than 2010, and intends to fly over 2.5 million passengers this year.

For 2012, the airline plans to post growth of 10 percent in passenger volume, based

their own specialists, which meant increased flight traffic. After some years, once the expats were replaced with local staff, the value of corporate travel also decreased.

Meanwhile, Malev officials showed The Diplomat – Bucharest a report suggesting the Romanian capital offers huge business potential for Malev, as a result of the increasing number of passengers flying via Budapest to Western European destinations like Hamburg, Berlin, Amsterdam and Copenhagen.

A tale of several cities

“Business tourism is the only component of the hospitality industry in Romania which can be objectively identified as efficient and growing,” says Paul Marasoiu, owner of hospitality consultancy company Peacock Hotels. Despite the relative stagnation of the

“Corporate tourism represents around 50 percent of the total volume of check-ins in accommodation units in Romania,” Sorin Ionescu, managing partner at Fivestar Hospitality

on its route and fleet expansion plans. From is the IATA value regarding airline tickets sold in Romania, are that in 2009, the market mid-2012, it will operate a new route from decreased dramatically compared to 2008, Bucharest to Verona and will increase the by 30 percent,” says Sorin Vaduvoiu, execu- flight frequency for its existing destinations tive director at travel agency Perfect Tour. in the CEE region. Next year Wizz Air will According to Vaduvoiu, tourism in 2010 operate 10 A320 aircraft from its 4 existing recorded an increase of 5 percent on 2009, bases at Baneasa Airport in Bucharest, Cluj and this year, the business increased over Napoca, Timisoara and Targu-Mures. last year by slightly more than 10 percent.

Flight revenues are directly linked to “We still have not reached the 2008 figures, the yearly business calendar and display but that dramatic fall was caused by panic,” seasonal fluctuations, according to Paula Ardelean, sales and marketing vice-presihe comments.

Companies cut travel budgets and dent of Carpatair. invested in videoconferencing and other “In summer months, when businessmethods, but failed to do business, so they people take their holidays, corporate travel have started to increase travel budgets as the is compensated for by leisure passengers,” need for travel is increasing. Elena Anghel, says Ardelean. The company has not felt a director of travel agency Paralela 45, added, recovery in the market compared with 2008.

“Although 2009 brought both a decrease in “The travel segment depends very much on the number and duration of trips, meaning Romania’s strategies to attract investments fewer nights, in 2010 and in 2011 things and, as a result, an increasing corporate started to recover, but they have not reached travel segment,” Ardelean tells The Diplothe 2008 level.” mat – Bucharest.

Another dent in corporate travel has been Airlines hope corporate caused by employers’ human resources strategies and personnel cost-cutting. Ardelean tourism takes off Corporate business is also generated by air- notes that many multinational companies lines. For instance, in 2011 flagship Ger- first entered the Romanian market with

last two years, the consultant argues that hotels count on business travelers. According to market estimates, the total revenues gained from business tourism ranks from 70-95 percent of a hotel’s total business performance.

Marasoiu believes that business travel could be worth over EUR 500 million (RON 2.2 billion) this year, with the largest percentage coming from corporate travel, meaning direct demand generated by companies. The level is 9 percent below the peak of 2008, he says.

The features characterizing this segment vary between Bucharest and Romania’s other business-orientated cities. For instance, while hotels in Bucharest can sometimes post 95 percent occupancy and revenues from business travel, for cities such as Cluj and Timisoara revenues go to 75-80 percent, according to calculations by SBS Hospitality Consulting & Management. “If we refer to 43

business travel the traditional mountain resorts in Prahova Valley, business tourism represents around 60-65 percent of check-ins,” Bogdan Sendrea, managing director of SBS Hospitality Consulting & Management, tells The Diplomat – Bucharest.

dependent on the economic and financial climate,” says Sonia Nastase, general manager of Howard Johnson, adding that she has learned to deal with lower incomes and adjusted expenses. In addition, since the economic crisis began, people have become more demanding, looking much more at Different expectations what they are spending and expecting to Within its Romanian operational and marreceive the same quality for less money. keting plan for 2011-2015, the consultancy Plus, bookings are now coming in at company Fivestar Hospitality, also the the last minute. “While before the crisis, a group might make a reservation a few local representative of multinational network Horwath HTL, predicts significant months before, now it happens a week or two changes as regards foreign tourists’ stays in advance, because budgets are tighter, so in the country. you can confirm an event today or tomorrow “In our estimations, corporate tourism for next week,” says Dana Chiriac, marrepresents around 50 percent of the total keting and PR manager at Intercontinenvolume of check-ins in accommodation units tal Bucharest Hotel. Businesspeople now in Romania. However, the percentage should also spend on average two days fewer at gradually fall to 30 percent by 2016, being Bucharest’s five-star hotels, according to market players. compensated for by an “The employment increase in the leisure segment,” says Sorin market has fallen, but the average room rate Ionescu, managing partner at Fivestar Hoshas fallen even furpitality. According to ther. However, this him, a major competiyear there was an tiveness advantage for increased occupancy Romania is its size.

Javier Garcia-del-Valle, executive vice-president and CEO of Happy Tour Group rate in the four- to “That is why I am five-star hotel marmore than sure that Bucharest is a major ing a similar level to this year but worries ket, while some well placed hotels had an business destination in the CEE and SEE stemming from the external economic situ- increase in the average room rate, which regions. Moreover, Romania has several varies from hotel to hotel,” says Daniela ations of Italy, Spain and even France,” he other large cities which will confirm their reports. Currently, for Fivestar Hospitality, Dumitrescu, director of marketing at Radiscorporate travel potential in the future, such son Blu Hotel. Although the hotel opened the main business destinations in Romania as Cluj, Iasi, Constanta, Timisoara and during the crisis, three years ago, it has regare Bucharest and Cluj-Napoca.

Craiova,” says Ionescu. Regarding the turnistered growth from year to year. “However, over gained from local corporate tourism, Sleep means money thanks to the downturn we do not have those the consultant estimates that for a turnover The crisis has also hit hotels. “2009 was great figures from before the crisis that oththe most difficult year for us. The situation of EUR 500 million, the growth since last ers hotels had,” adds Dumitrescu.

One of the problems the big hotels in of a hotel is reflected in the economic and year can be estimated at 20-25 percent. financial situation. Those who come to your Bucharest are facing is that Romania doesn’t “The signals regarding the next year are attract many five-star tourists and, therefore, mixed, with optimistic projections indicat- hotel depend on their business. We are also hotels in this category have lowered rates by 50 percent to lure customers away from three- or four-star competitors, according to Radu Enache, president of the Hotel Industry Federation, quoted by a news agency. Enache says that tourists who come to Romania generally can’t afford to pay normal five-star rates. Room rates in the top hotels in major world capitals vary between EUR 150 and EUR 250 per night. In Romania, prices are generally below EUR 100, and can fall to EUR 70-EUR 80.

According to Ministry of Regional Development and Tourism (MDRT) statistics, there are 1,535 hotels in Romania, of which 31 are ranked at five-star, 236 fourstar, 746 three, 450 two and 72 one-star.

Still, according to data provided by Peacock Hotels, the average daily rate (ADR) in 2008 was EUR 90 in Bucharest, with an occupancy rate of 63 percent. In 2010, an ADR

“While three years ago if people had a meeting abroad, they stayed there two nights. Now, they are returning the same day to save money,”

44 The Diplomat December 2011

business travel of EUR 69 for a four-star hotel brought an occupancy rate of 55 percent, while in 2011 an ADR of EUR 72 led to an occupancy rate of 60 percent.

Back in business?

“Things will never be at the same level as in 2007 and 2008. The business landscape has changed completely, the applicants for jobs are different, some things were relocated to other bases, people are more careful – but this does not mean that things are standing still,” Anghel tells The Diplomat – Bucharest. This year, travel agents have seen an increase compared with 2010 since companies have realized that they cannot abandon the personal approach and face-to-face meetings with clients. “But they continue to keep costs down,” adds Garcia-del-Valle.

On the other hand, according to Cristina Nitu, marketing and PR manager at JW Marriott Bucharest Hotel, 2011 has brought an improvement in the European financial situation and a series of large-scale cultural, political and economic events (for instance, the Enescu Festival and NATO Summit).

“The hotels operating in large international chains and benefiting from the international marketing and sales infrastructure

500

million euro is the value of the local business travel segment in 2011 are expected to create strategies in order to attract a larger amount of international corporate events to Romania,” says Sendrea.

According to Patrick Andersen, executive vice-president of travel management company Carlson Wagonlit Travel (CWT) for Northern countries and Eastern Europe, Bucharest has the right infrastructure for organizing largescale events or other corporate proceedings, even though the tariffs for accommodation are too high compared with other European cities. The infrastructure, in conjunction with a dynamic strategy and efforts to create attractive packages, has led to an increase in occupancy rates in hotels in Bucharest.

But players must work to take advantage.

“We have to improve in this direction to be completely satisfied. We expect the upward trend of this year to continue in 2012 and

our hotel strategy aims at increasing rates in particular, and continuing occupancy rates,” Nitu adds. Although business is still below the levels of 2007 and 2008, most hotels are posting numbers above the figures in 2009 and 2010, and for next year the expectations are of further increases.

“All this will happen if things remain stable on the external market. Some 90-95 percent of our customers are foreigners and our evolution depends very much on how the international economic situation goes,” says Dumitrescu. Both hotels and travel agencies say that the external situation affects their business. Currently, they agree, the situation in Europe is rather gloomy. If the trend in 2008 had continued – major investments, with companies coming here and investing – things would be much better now, say players on the hotel market.

“We hope that companies will make new investments in the country. We depend on them,” says Vaduvoiu, adding that he plans to strengthen the business. Garcia-del-Valle also hopes the climate will improve next year. “At the same time, I am worried about the economic situation – when an economy catches a cold, travel gets the flu,” concludes the Happy Tour chief.

45

business travel Business destination or not?

percent of a total tourism turnover of EUR 12 million, in 2008, on double the turnover, For businesspeople travelling a lot, espe- it accounted for 30 percent. In 2009, the cially in the CEE region, Bucharest is defini- percentage increased to 50 percent. tively a business destination, while for some But Bucharest cannot yet be considered it can even be a “home from home”. a priority business destination for hotel With many corporate organizations, investments, compared to Hungary or the exclusive business clubs and associations Czech Republic, says Bogdan Sendrea of established in the last decade to meet SBS Hospitality Consulting & Management. the networking needs of business peo- “The international hotel chains are keepple, Bucharest, and Romania overall, “is ing their interest in investing locally, as in among the first choices for an executive,” the cases of Wyndham, Hilton and Louvre, says Sotiris Chadzidakis, the CEO of the but mostly through franchise contracts and business association CEO Clubs, which rarely through management contracts, due has been operating for 34 years in most to the market risks,” says Sendrea. “Usuworldwide business cities. “First of all, we ally, such hotel chains don’t invest in hotel are talking about the biggest market in the premises.” region. Almost all major companies have Business tourism is not marked by the brought their business here, there is a lot of seasonality of the leisure segment, but it is entrepreneurship and the country is busi- true that business trips are rather rare in ness-friendly in terms of both attitude and summer. “Tourism is a seasonal business infrastructure. For corporate tourism, I that remains fairly constant, but changes little in the profile of services. Well attended corporate events are mainly in the spring and autumn, with summer instead seeing team building,” says Anghel. Marasoiu adds, “The corporate travel of business trips and events is concentrated in the periods outside

Tulip this month opened a conference hall with a capacity of 50 seats. “Our hotel has always suffered because we didn’t have a conference room, despite being a business hotel. We have a room with 14 seats, but that did not meet the requirements,” adds Budaca, adding that companies sign contracts with hotels offering all the facilities.

A European view

Western Europe is still the main focus of hotel transactions. But what are investors searching for? According to Lukas Hochedlinger, manager of business development for Austria & CEE at Christie +Co, the current capital market outlook for the hotel segment reveals a tentative approach by investors, with transaction activity concentrated in Western Europe, in countries such as the UK, Germany, Spain and Italy.

Regarding the CEE region, investors are still cautious but signs of recovery have started to show, especially with banks becoming more open as of H2 of 2010.

Investors’ capital expenditure is focused on distressed assets, high-profile trophy assets and primary rather than secondary locations. “Opportunities at a discount” are

“Business tourism can be objectively identified as efficient and growing.

The current level of business tourism is 9 percent below the peak of 2008,” Paul Marasoiu, owner of hospitality consultancy company Peacock Hotels

think the country is at a good level but can surely develop further,” Chadzidakis tells The Diplomat – Bucharest.

“Romania is definitely a business destination because there are many regional firms. For example, many Austrian companies have invested in Romania. Our country is a very important market for them. If you look at the schedule of flights to Austria, every day there are about ten flights to Vienna,” argues Sorin Vaduvoiu, adding that Bucharest is mostly seen strictly as a business destination.

Besides Bucharest, other business cities in Romania are Timisoara, Cluj, Brasov and Constanta. But by volume, Bucharest is the top destination. Given this situation, Perfect Tour has had a strong business travel development strategy in recent years. While at the end of 2007, corporate travel represented 10 46 The Diplomat December 2011

the traditional holidays, contributing to the occupancy rates of hotels active also on the leisure segment.”

But Javier Garcia-del-Valle of Happy Tour says that Romania is unfortunately not a top business travel destination, like Hungary, Poland or Serbia, and the main barrier is the infrastructure.

“It takes twice as long to go between cities in Romania as when travelling abroad.

To go from Bucharest to Arad, for example, takes eight hours by train or by car. And the investments have decreased in the past three years,” he says.

Hotels in Bucharest are business oriented because there is potential on the market. “Efforts are being made and we all know of new projects to increase the number of tourists in Bucharest, but these projects have not yet contributed consistently enough to change the balance, and the business segment clearly remains the predominant one in our hotel,” says Larisa Budaca, general manager at Golden Tulip hotel, where the leisure-business split is 30-70. Given the business potential of Bucharest, the Golden

sought after, but, according to the Christie +Co consultant, deals worth over EUR 50 million remain challenging.

The total European hotel transaction volume reached EUR 6.5 billion in 2010, a 110 percent increase on 2009. According to data provided by the HVS London office, the sum is far below the 2006 peak, when hotel transactions in Europe reached EUR 20 billion.

In the years since 2006, the average transaction was EUR 10 billion, half the figure from the previous years, according to Saurabh Chawla, director of asset management services at the London office of consulting and valuation company HVS. Still, the consultant detects improved investor sentiment in the region, within an overall context of liquidity restrictions.

Trends on the hotel market in 2012 are likely to include more capital expenditure, and the exchange rate is expected to affect transactions. Meanwhile, the BRIC countries are likely to play a more and more important role and distressed assets may still be the subject of deals in 2012. ■

hotels

Prepare to party like

it’s 2012!

This year, as in the past two years, Bucharest’s five-star hotels are not throwing the glitzy parties they used to host before the crisis, which once brought in big bucks.

Why? The answer is pure mathematics: it is no longer profitable. However, each hotel is trying to attract revelers by hosting themed parties and promotions. The Diplomat – Bucharest scours the top five-star hotels in Bucharest to find out what’s happening over the festive season.

By Roxana Cristea

I

n one part of the city there will be a Venetian-style celebration, elsewhere a retro party and in another location a bash that recalls the interwar period. But many of the local five-star hotels have opted to host only festive dinners. They have dropped the famous singers in favor of DJs and bands, while menus vary from traditional Romanian dishes to lobster cocktail and duck breast. Such are your options if you wish to celebrate Christmas or ring in the New Year in five-star style in Bucharest.

“The lavish parties in which we invested heavily without necessarily turning a profit are gone – this year we will not have parties with renowned artists, because people no longer demand it. After the crisis, things began to change,” Dana Chiriac, marketing and PR manager at Intercontinental Bucharest, tells The Dip-

lomat – Bucharest, adding that customers are not willing to spend as much money on a New Year celebration as they were before the crisis.

Moreover, she adds, concerts are also staged in the public squares, so revelers can see and hear their favorite artists for free. However, Sanda Almasan, general manager at the Grand Hotel Continental, tells The Diplomat – Bucharest that at a New Year’s Eve party, more important than the food and fun are the artists – but they are also the most expensive element.

“As much as you would want to keep to the theme of a party you must have dancing and music, Romanian folk music,” she adds. Most hotels have given up booking famous performers, and are resorting to other incentives such as offers for accommodation, generous discounts for New Year’s Eve dinner and promises of fun.

Athenee Palace Hilton: Three times Happy New Year!

“Our festive Christmas shop made of icing and gingerbread will be offering tasty surprises for Christmas.” This is how Athenee Palace Hilton is tempting its clients over the winter holidays. For the first time this year, from December 6 the hotel will organize lunch buffets with Christmas dishes which will feature food from different countries.

And on Christmas Day itself hotel guests can enjoy a festive brunch in Le Diplomat Ballroom.

“Last year we didn’t have such buffets.

We wanted to do something a little bit different. I talked to some people I knew and they told me that they would like to have their own food on Christmas Day,” Linda Griffin, general manager of Athenee Palace Hilton, tells The Diplomat – Bucharest about the 47

hotels

“We will hold three parties on New Year’s Eve: a boutique party, an 80s disco and the big event is in Roberto’s, with a Venetian Celebration theme,” Linda Griffin, Athenee Palace Hilton GM

lunch buffets planned for December.

According to the manager, guests will not benefit from special offers for Christmas brunch, only for the New Year’s Eve festivities. These will consist of three parties. “One of them will be a boutique party, with a DJ and saxophone – we had this party last year and we decided to do it again. In the English Bar we will have an 80s disco, which we had last year too. The big event will be in Roberto’s, where the theme will be Venetian Celebration,” says Griffin. The staff of the hotel chose the Venetian theme because “it’s romantic and they have good food”. She adds, “I think the parties will be more successful than last year. Roberto’s guests can go into the executive lounge to watch the fireworks show in Piata Constitutiei.”

Ramada Park and Ramada Plaza: We wish you only ‘Merry Christmas’

“Every year we organize traditional Christmas parties, especially for corporate events, and we have quite a long list of companies that like to return to our hotel during this period for those occasions,” Daniel BenYehuda, general manager of Ramada Park and Ramada Plaza hotels, tells The Diplomat – Bucharest about the Christmas parties the firm organizes in December.

According to the manager the company is

very flexible regarding menus and prices, at EUR 40-45 per person. Unfortunately, Bucharest is a very business-oriented destination, so for the Christmas parties held in the middle of December, few businesspeople are staying in the hotels. “We usually have 20 Christmas parties in this period. We are on target for this year. But with the difficult economic situation in Greece and Italy, the companies are more cautious, and have dropped Christmas parties,” says Ben-Yehuda.

During the boom, Ramada hosted New Year parties every year. “After the crisis started we tried to do it but we found it was getting a bit more difficult to attract guests. They prefer to spend EUR 200 on a laptop than on a party. Life was much rosier before the crisis; now it’s gray. Also, a lot of restaurants in town host economical events, with lower prices, while the amount of money we spent on such a party was not being covered,” says the manager, adding that the firm is open to organizing specific events if a group of guests want to ring in the New Year at Ramada.

Intercontinental Bucharest Hotel: Just like last year

From November 28, the lobby of the Intercontinental Bucharest will be home to a special place where shoppers can buy gingerbread and traditional Romanian cakes.

The project is being carried out in partnership with the Romanian Peasant Museum and is an early sign of the festive season.

On December 25 the hotel staff will organize a Christmas brunch in the Fortuna room, for RON 190 per person, where diners can enjoy both traditional Romanian dishes and international fare.

For its New Year party, Intercontinental Bucharest will serve dinner in the Modigliani restaurant for RON 495 per head. Meanwhile, Corso Brasserie will host a buffet for

revelers who want to come, eat and then go on elsewhere. On January 1 hangovers can be nursed over brunch in Brasserie Corso, for RON 150 per person. The brunch will be accompanied by a concert by the Athens Philharmonic. Discounted accommodation will be available for people who wish to spend New Year’s Eve at the hotel.

“We decided to offer a package that included accommodation and brunch the next day. The price is RON 550 per couple and that includes a 20 percent discount at the restaurant. That’s selling pretty well.

We have the same offer as last year, but prices have risen because of the increased cost of the ingredients,” says Dana Chiriac, marketing and PR manager at Intercontinental Bucharest Hotel. She adds that last year both venues sold out, with most guests 35 or older. They party until midnight and then retire. “It’s a different New Year’s Eve party from what used to happen a few years age – very large events, with very expensive entertainment and a much higher package price,” adds the manager.

Radisson Blu Hotel: Another kind of New Year’s Eve party

“For our New Year party we dropped the idea of a full entertainment program which takes all night,” Daniela Dumitrescu, director of marketing at Radisson Blu Hotel, tells The Diplomat – Bucharest,

“We decided to change the strategy as guests prefer to go elsewhere and not to pay for a hotel party and be forced to stay there all night,” Daniela Dumitrescu, marketing director at Radisson Blu Hotel

48 The Diplomat December 2011

hotels

“After the crisis started we tried to organize New Year Eve parties, but we found that guests prefer to spend EUR 200 on a laptop than on a party,” Daniel Ben-Yehuda, Ramada Park and Ramada Plaza hotels GM

adding that this year the firm has come up with a new idea. Instead of a traditional party, the Radisson Blu Hotel has tried to adjust to its customers’ schedule and respond to the feedback the company had received from its guests in previous years, and has two new offers: either guests have a meal in the restaurant with dishes of their choice from the usual hotel menu, along with some entertainment, a DJ and some special decorations, or they can enjoy a pre-ordered set menu. The entertainment will end before midnight, after which the guests can go home, onto a nightclub or to a concert.

“We decided to change the strategy because guests have told me that they prefer to go elsewhere and not to pay an extremely high amount of money just for a hotel party and be forced to stay there all

night,” says Dumitrescu. More specifically, representatives of Radisson Blu Hotel have realized that their type of client prefers to not celebrate all night in just one place.

“On top of that it is not necessarily very profitable for a five-star hotel to spend a lot of money on throwing a big party, with great and expensive entertainment. As regards foreign suppliers, the money does not stay at the hotel,” adds the director of marketing. After the entertainment in the restaurant is finished, if guests want to stay in the hotel they can toast the New Year at the bar. “We already have several groups who have confirmed that they will stay in the hotel for the New Year party. We have seen in the past that foreign guests staying in the hotel prefer to go to much busier places, to experience the city’s local color. In terms of occupancy rates for the

rooms, December is a slow time, especially as Bucharest is a business city. However, for Christmas we rely especially on Sundays for the established Sunday brunches, because we have noticed that everyone has more time available: people are more relaxed and there is time to spend with the family,” says Dumitrescu.

49

hotels

“From this year we will organize corporate Christmas parties as we will finish a conference room, an investment of up to EUR 60,000,” Larisa Budaca, general manager at Golden Tulip

Howard Johnson Grand Plaza Hotel: Romanian party month

“The whole month of December is devoted to the winter holidays and we have chosen to have traditional, Romanian and authentic events,” Sonia Nastase, general manager of Howard Johnson Grand Plaza Hotel, tells The Diplomat – Bucharest. The series of holiday events begins with the Saint Nicholas brunch for children, which has been very successful in previous years, she says. Then follows the Christmas brunch on December 25, with special Christmas restaurant menus.

“In this period we also have corporate parties for which we launched some special

offers in the summer. Already we have had some requests, and the number of applications is a bit better than last year. We have all-inclusive packages that include food, drink, music and lights. We start with a package of EUR 29 per person,” says Nastase. She adds that each year, between 9 and 22 December, such parties take place at Howard Johnson.

Like last year the New Year party at the hotel will be a little different – only for big groups. The company launched the concept in 2010 and found it to be well received by guests. “We found groups of up to ten friends that we have united to create a larger party,” says the GM, adding that the hotel has already had a few requests for this year’s event. “The groups concept helps improve the event because they have the same taste and listen to the same music. To organize a New Year’s bash for 200 people and try to please everyone is a tall order.” The New Year’s Eve party at the Howard Johnson will be held in the Iridium room and the price per person is around EUR 120. “There will be a club atmosphere,” promises Nastase. Half the room will be arranged as a lounge, while the other half will have tables and chairs.

“I think more people will be present at the

party this year than last year, as we have already had several enquiries. Regarding the Christmas party, I think it will be a little better. We have very high growth, somewhere around 5-10 percent,” she adds.

For years, like other five-star hotels in Bucharest, Howard Johnson held the same kind of New Year’s Eve party based on individual tickets, but found it difficult to organize an event to suit everyone. “Last year I didn’t want to organize a New Year party because it’s hard to make this event profitable, but we changed our mind when a group of people wanted to have a party,” says the hotel head.

Golden Tulip: Vive les corporate parties!

“From this year we will organize corporate Christmas parties. The greatest novelty at Golden Tulip is that this month we will finish building a conference room with a capacity of up to 50 seats in which we have invested EUR 50,000-60,000,” says Larisa Budaca, general manager at Golden Tulip.

Until now, the hotel had not organized corporate Christmas parties because it had only one restaurant, in the lobby of the hotel.

“Beside Christmas in the restaurant which

Christmas and New Year party offers at five-star hotels in Bucharest Hilton Christmas A Very Merry Christmas Brunch in Le Diplomat Ballroom Price: RON 220 New Year Venetian Celebration at Roberto’s Price: RON 850 Boutique Club at the Cafe Athenee Price: RON 450 Disco night at the English Bar Radisson Blu Hotel Christmas Sunday brunch for Christmas New Year party Party in Prime restaurant Ramada Plaza & Ramada Bucharest Christmas: Christmas Brunch Price: EUR 45

50 The Diplomat December 2011

Intercontinental Bucharest Christmas Christmas brunch in Fortuna room Price: RON 190 New Year Dinner in Modigliani restaurant Price: RON 495 Buffet in Corso Brasserie Price: RON 150 Grand Hotel Continental New Year Interwar celebration at Concerto restaurant Price: EUR 170 Golden Tulip Christmas Christmas brunch Price: RON 50 (food) and RON 25 (beverages)

Marriott Christmas Christmas Cucina Price for lunch and dinner: RON 180 Brunch at JW Steakhouse Price: RON 200 New Year With a Twist 60s 70s Move to the Groove Crazy 80s Champions Stars, Stripes and Fireworks JW Steakhouse Price: RON 890 Howard Johnson Christmas Christmas brunch New Year party Party in Iridium room Price: EUR 120

hotels

“The whole month of December is devoted to the winter holidays and we have chosen to have traditional, Romanian and authentic events,” Sonia Nastase, general manager of Howard Johnson Grand Plaza Hotel

will be for guests, because we have this conference room we will organize corporate parties with varied menus. It will cost RON 50 per person for food, and drink packages will start from RON 25 per person. Premium packages will reach around EUR 90.

Traditionally, our hotel is quite busy until December 20, followed by a brief quiet period, then several tourist groups of different nationalities appear for the New Year party,” says Budaca.

JW Marriott Hotel: Retro winter glam

“Generally, at the JW Marriott Hotel the first party to quickly sell out is the children’s party on Saint Nicholas’s Day. Last year we needed to open a second room for the guests participating in this party,” says Cristina Nitu, marketing director for JW Marriott, about the winter season opener.

Christmas brunch features lobster cocktail, ricotta with citrus fruit, black caviar, smoked sturgeon carpaccio, capers and coriander salsa and fried duck liver, to try to attract to the hotel guests for the New Year party. This year, the New Year will be seen in at the hotel through four retro-themed parties: With a Twist 60s; 70s: Move to the Groove; Crazy 80s Champions; and Stars, Stripes and Fireworks JW Steakhouse. “The prices are similar, with very few changes from last year, especially due to fluctuations in the cost of the entertainment,” says Nitu. A ticket to a New Year party at the five-star hotel costs RON 890.

“Guests had a 10 percent discount on tickets purchased before 30 November, and we had

Last year’s New Year’s Eve party at Athenee Palace Hilton Bucharest

a good part of the reservations by this date.

After that, in general, tickets are sold from the second half of December,” she adds.

Crowne Plaza Bucharest: New Year’s Eve party on the red carpet

“Last year was a success with a maximum occupancy rate for the New Year’s Party, while our Christmas brunch attracted many families with their kids. This year we are sure that we will have a full restaurant for the New Year’s Party and for our Festive Brunches and Christmas Brunch,” says Ana-Maria Ciotec, deputy director of sales and marketing at Crowne Plaza Bucharest.

This Christmas, hotel staff will organize a buffet with seafood delicacies, roasts and a wide range of traditional Christmas desserts. Live music and a special kids’ corner with Santa Claus will complement the festive atmosphere. Just under a week later on New Year’s Eve, guests can be a showbiz star at the red carpet party. “Besides the live music show, our executive chef will prepare an exquisite and festive buffet,” says Ciotec, adding that tickets cost RON 699 per person.

Continental Hotels: Pyramid of champagne at midnight

“For the New Year we want to organize an interwar themed party. The reason? This year Continental Hotels turned 20 years old and we thought of all the events with links to 20, which led us to the period in which

the Continental had the greatest shine and was a place of reference for Bucharest. We were perfectly matched,” Mihaela Staicu, spokesman at Continental Hotels, tells The Diplomat – Bucharest. Sanda Almasan, general manager at Grand Hotel Continental, the only five-star hotel in the local eight-hotel chain, said the firm chose the theme because it was the interwar period that provided the glory days of Calea Victoriei, where the hotel is located.

In addition to tunes from the era, the party will also have international music and a DJ. For the menu, hotel staff went to the Museum of History and searched period menus, recipes and names of dishes.

“Last year the party theme was Orient Express, and so the menu was characteristic of all the countries in which the Orient Express stopped. Entry was with train tickets and the tables had names of stations.

This year it’s easier to organize the party,” says Almasan, adding that in 2010 all 60 seats in the Concerto restaurant were occupied. Tickets to the New Year party cost EUR 170 per person, which includes six courses and a free bar.

“We’ll have a pyramid of champagne at midnight. Last year there was a show, which everybody liked,” recalls Almasan.

Entertainment will be provided by two female singers backed by a violin, bass, cello, piano, drums, and a DJ. People who attend the New Year party are generally over 40, but there are exceptions.

“From December 15, there will be a huge drop in guest numbers. We did three-night packages with lower prices, EUR 120-130, to encourage customers to come here during the holidays,” says Almasan, adding that Bucharest is not as attractive as Paris, where people welcome in the New Year on the streets. ■ 51

driving

New

joins the queue

The Audi Q3 is a car that offers more than you might expect.

By Adrian Ion

T

he versatile Q family from Audi has just gained another member. This is the smallest and cutest one, and was named Q3. Born in 2011, it goes to the same kindergarten as the BMW X1, the Range Rover Evoque and its cousin, the Volkswagen Tiguan.

This is a small car, but far roomier than you would expect: the truck is 460 liters and the interior will comfortably accommodate four adults, even on longer journeys.

My test drive model was the 2.0 TDI diesel version with 177 HP and the automatic seven-speed S-Tronic transmission.

This and the 2.0-liter TFSI petrol unit and 170HP are the only engine choices available for the moment. Being a light vehicle, these engines will do their job more than reasonably.

Although the Q3 can be considered an entry-level car in the range, Audi has not compromised at all on the quality of the materials used in the cabin. As you would expect, it’s nearly perfect. The driving position is good, ensuring fine visibility, which is a thing I have learned to appreciate more VITAL STATISTICS Tested model: Audi Q3 TDI 2.0 Engine& transmission: 2.0 litre, turbo diesel Drivetrain: 7 speed automatic S-tronic Power: 177 HP Top speed: 212 km/h 0-100 km/h: 8.2 secs

52 The Diplomat December 2011

and more in today’s cars which too often sacrifice visibility for the sake of design.

The tested version was also fitted with the whole package of parking sensors which are positioned around the vehicle, not only at the front and back. These sensors also work with the automatic self-parking system that will park the car for you.

The majority of the hi-tech gadgets found in bigger Audis can also be fitted to the Q3, so there is no feeling of this being a poorer brother for those who have deep pockets.

Driving this car is a pleasure, both in the city and on the highway. The small

body of the vehicle makes it easy to park, the steering is light and, as mentioned, visibility good, so it can be used as a city runaround. For longer trips, the trunk is large enough, the suspension setting is balanced and the four-wheel drive system will make it suitable for use through the year.

Prices in Romania start at around EUR 30,000, including VAT, for the 2.0 liter and 140 HP diesel version, two-wheel drive and manual transmission, but your final price will most likely go up by a few thousand for the must-have extras. Is it a price worth paying? In my opinion, yes – for the versatility and quality of this small SUV. ■

Interview with Mihai Popa, Club Manager World Class JW Marriott The Grand

World Class at the Grand - Marriott has a tradition of 10 years on the Romanian fitness clubs’ market. Which are the values of this club?

World Class JW Marriott The Grand is the first Health Academy opened in Romania. Therefore, the most important value is our experience and one of the greatest components is the specialized and very well trained staff, sustained by a complete service offer with Gym/Cardio; Aerobics/Cycling; Pool/Jacuzzi; Squash; Spa/Steam sauna/ Dry sauna, by the location in a five-star hotel and lately by the fact that World Class is a local and international chain that offers you the flexibility to train at any moment in any location.

The Marriott-based fitness club is currently undergoing extension works, what exactly will happen?

The market is changing, competition is growing and clientele is more demanding. Our plan is to offer exclusive programs and facilities to make sure we keep our position as a leader on the market. In a few words, “our club will become grandiose”, meaning that we will extend our Gym area with 120 sqm and we will open a new Cycling Studio with 30 bikes as starting point. The grand opening will take place in the beginning of December 2011, we will launch the new club with a fitness event on December 17th completed by a Tropical Christmas Pool party in the evening.

What is the total investment of the World Class at the Grand, and how much of it goes into extension?

Hard to describe the total investment in this location since we opened the doors in 2000 but as a reference we can talk about the investments that we made in the last 4 years. The total investment is over 500.000 euro, we invested a lot in renovation of our facilities, upgrading the premises and adding new services. Proudly I can say that we were the first location from World Class International with Spa services, launched in 2008, having as partner Top Line Romania with products lines like Babor and Guinot. We renovated the reception, pool and changing areas, upgraded the equipment, opened the new Spa by World Class and in this moment we work on our club extension where the total investment in renovation and equipments exceeds 110.000 euro. We won’t stop here, we made a promise to our clients and we will keep it by offering fivestar services in five-star facilities and best fitness programs.

What can you tell us about the trainers, aerobic concepts and fitness trends at the World Class?

Champions Team, indeed! We have a young team with a good background, we’ve develop a very efficient team with a general stereotype governed by common sense, professionalism, seriousness, willing to acquire and develop. The most important achievement is represented by the results obtained due to these qualities and investment done in each team member. Apparently we are in an intermediate position, the society evolves in an alert rhythm and we have to keep up, but I can also say that there were moments when we set the rhythm by launching new fitness concepts.

As I said, a Champions Team with a winner mentality, raised on those few sport courts that we have and many times with results above our expectations. We have Iulian Panait - Balcanic Champion on 400 m hurdles, Mircea Nicolescu – Silver medal on European Championship 2006, bobsled;

Dumitru Butilca – the only trainer from Romania with TRX (Suspension Training) International Certified; Alexandru Marcu – National Basketball Champion; Andreea Pavel – National Javelin Throw Champion and many more.

A few months ago we launched the aerobics program Les Mills Concepts as Body Combat, Body Pump and CXWORX with a huge success in World Class Romanian Clubs. I must say that this is one of the most appreciated programs that we offer, having concepts for all client needs starting with kids lessons and ending with the most demanding programs Switching Circuit and Cycling classes.

Could you draw us your client’s profile?

For our location most of our clients are business people, top management, doctors, and lawyers. This doesn’t mean that we do not address also to categories as students, corporate, kids, by creating special offers and programs for all requirements. The common aspect for all clients is their care and interest for a healthy body, mind and spirit.

How do you describe the fitness market in Romania at the moment?

The fitness market had an explosive evolution in the last few years and contrary to our society’s expectation and economical situation, is still growing, competition becomes stronger but there is still space for improvement and development. It’s easy to see the citizens’ growing interest and I have to say that World Class had and has a huge impact on our local market by imbuing a healthy mentality and implementing a healthy lifestyle. As an example of this evolution, in the last 2 years World Class opened 3 new clubs in Romania, reopened the location form Timisoara and next year we intend to open 2 other clubs in Bucharest.

Sketch, gym Marriott, 110517

real estate Astra Vagoane Arad sells over 4 hectares of land as part of restructuring

Liquidator Casa de Insolventa Transilvania (CITR) will sell 4.4 hectares of land in Arad owned by Astra Vagoane, as part of its restructuring process. The land is located on the city’s main area for mall developments, dubbed “the street of malls”.

Aurel Vlaicu Avenue hosts a Galleria Mall project, being developed

by GTC Romania, and the retail park West Gate built by the Austrians of Meinl Europe. The Armonia Arad mall, developed by Red Management and owned by Immmofinanz, has already opened across the West Gate.

Arad’s industrial platform is located near the Atrium Center mall, which opened in 2010. Israeli mall developer Afi Europe also owns a large stock of land in the vicinity.

Subsidies for house building halted due to lack of financing

The Romanian Government has withdrawn its subsidy for the construction of residential units sold through mortgages, due to a lack of funds from the state budget. The move was made through a government ordinance and does not apply to investors who have already submitted applications under the scheme. Government aid for building a house on a mortgage equates to 30 percent of the construction costs up to a ceiling of the RON equivalent of EUR 15,000.

Tourism investors to get tax relief from 2012

Owners of tourist accommodation who rent up to five rooms to guests will be able to register as individual investors and will no longer have to do so as authorized private individuals (PFA), with the option to pay taxes according to their revenues established by each county. According to representatives of Ministry of Public Finances, the rule will be included in the new Fiscal Code and will come into force in January 2012. The new regulation will also be included in the Tourism Law.

54 The Diplomat December 2011

Grace-and-favor homes to be sold through public auction The Government has approved by ordinance the sale of 733 grace-and-favor properties of a total of 1,100 real estate assets owned

by RA-APPS, the authority that administers government properties. Another 108 courtesy homes will be put up for sale when their legal status is clarified.

RA-APPS has 650 grace-and-favor properties, over 75 villas and 250 hectares of land inherited from the communist regime and currently occupied by former state officials and their relatives. The auction prices will be established by authorized experts and the sale will be made through public auction, according to government information. Private and individual investors will be able to bid along with the current own-

ers of the properties, unless they have run up debts or are involved in other litigation with the authority. Buildings occupied by public institutions, diplomatic missions, consulates, embassies, inter-governmental institutions and political parties, and those being used by former state presidents, will not be sold off.

Within the state budget established for 2012, the Romanian Government plans to make EUR 164 million (RON 706 million) from the sale of the 773 residencies. Following a decision last month, the Government will exempt public institutions and RA-APPS from paying local taxes on their buildings, says the emergency ordinance on the sale of the state residences. ■

European Commission gives green light to 27 km of Lugoj‑Dumbrava highway segment

The European Commission has approved a grant of EUR 177.4 million for the construction of 27.4 km of the LugojDumbrava route, part of both the LugojDeva highway and the fourth Pan-European transport corridor. This is the third tranche of highway financing from European funds and approved by EC, after the commission awarded EUR 724 million in September for the construction of two other sections of road, from Nadlac to Arad and Orastie to Sibiu.

The highway between Lugoj and Dumbrava, which is to be built by a consortium of three companies, Tirrena Scavi, Societa Italiana per Condotte d’Acqua and Cossi Construzioni, is due for completion in 2013. According to ministry data, the contract with the three

companies is worth EUR 265 million.

At the end of November, Eusebiu Pistru, state secretary within the Ministry of Transportation, said that the 32 km of highway between Arad and Timisoara was 90 percent completed and was due to enter into use in December.

Between September and October, the biggest ten highway construction sites in Romania grew by between zero to 16 percent, according to the Romanian roads authority (CNADNR). The most progress was made at the Arad ring road, which advanced by 16 percent in the period, while no expansion occurred at the segment between Suplacu de Barcau and Bors, where construction was halted until October 2011, due to lack of funds. ■

real estate Changes in the air for budget carriers and Tarom

EUR 120 million Asmita Gardens project goes bust

The developers of the seven 24-storey towers of the Asmita Gardens project in southern Bucharest have filed recently for insolvency, leaving Alpha Bank, the project’s main creditor, with exposure of EUR 70 million from an overall investment of EUR 120 million. So far, of a total of 800 apartments in Asmita Gardens, the Indian developer Asmita and the UK fund ECDC managed

by Charlemagne Capital have sold only 365. In March this year, all sales were halted.

Curtici-Arad railway to get EUR 250 million revamp

Low-cost flights currently operating out of Bucharest’s Baneasa Airport will switch to Henri Coanda International Airport from March 2012, Ministry of Transportation officials have announced. Budget airlines operating in Romania, such as Wizz Air and Blue Air, have protested that the measure will push up air fares, with representatives of Wizz Air saying that taxes at Otopeni are much higher.

But ministerial officials deny the claim, saying that the move will only marginally raise fares.

“The increased cost of a ticket would be EUR 4 and I am saying this to prevent a new round of complaints from private operators in order to justify higher ticket prices,” said Anca Boagiu, the minister of transportation, on a visit to Otopeni Airport.

Henri Coanda International Airport will

see another major change next year, with the opening of a second departures terminal scheduled for July 2012. The new 19,600-sqm terminal will be developed by the Bucharest Airports National Company, with an investment of EUR 62 million. According to Boagiu, the new terminal will double the airport’s transportation capacity and include 52 check-in desks and eight boarding gates. On the list of companies to be privatized drawn up with the International Monetary Fund, the first auction to select a consultant for the sale of a 20 percent stake in Tarom ended in failure. The sole offer was deemed “expensive and unsuitable”, said Boagiu. The auction was annulled but the ministry will organize another, as, according to the minister, a consultant has to be selected

by December. ■

Bucharest’s former industrial platforms to host large retailers Large retailers such as Carrefour, Kauf land, Auchan and Cora intend to extend on the former industrial platforms of Bucharest, with plans to develop up to seven units on such sites in the next three years, according to company data.

The retailers scoured western, eastern and southern Bucharest in search of locations. Carrefour, Kauf land and Auchan have struck deals with the own-

ers of platforms such as Electroaparataj in Pantelimon, Romprim in Berceni and Grant metal in Crangasi as part of their development plans to open new hypermarkets. Cora will be the main anchor for the ParkLake Plaza project being developed in the Titan area by the Irish investment group Caelum Development.

The Tricodava platform could also host an Auchan hypermarket. ■

The border railway segment linking Curtici and Arad will be overhauled at a cost of EUR 250 million, following a contract awarded by the Romanian Railways (CFR) to a consortium formed by the Italians from Astaldi, Austrian company Swietelsky, French firm Alstom and Romanian companies Euroconstruct Trading 98 and Dafora. This is the second contract for the repair of the national railway network after the Romanian Railways awarded a near EUR 76 million contract for the upgrading of the Vintu de Jos-Simeria railway line. The investments are financed 85 percent by European funds with the rest of the money coming from the state budget.

Altex plans to open three more stores by year-end

Household and IT products retailer Altex plans to expand by three more stores by year-end, after opening eight new units in 2011, following an overall investment of EUR 4 million. The openings this year came in Turda, Sfantu-Gheorghe, Miercurea Ciuc, Sighetul Marmatiei, Baia Mare, Ramnicu-Valcea, Targu-Mures and Bucharest. The three new openings will be in Timisoara, Cluj and Alba-Iulia. So far, Altex has a network of 90 retail units in Romania.

Its main competitor is Domo, with 126 units.

55

events

Charity ball: The 11th Edelweiss Charity Ball, the largest such event in 2011, organized by Hope House Hospice and producer Maria Andrei to raise funds to support free services for children and adults with incurable diseases, generated EUR 160,000. The highlight of the evening was a surprise appearance by the iconic Star Wars character Darth Vader, accompanied by his troops!

Master chef: The Grand Hotel Continental held a contest to

find the hotel chain’s best chefs. After a theory test, the eight participants were set three gastronomic challenges: a 1920sstyle dish, a vintage dish and a royal dessert. The winner of the title “The Best Chef in Continental Hotels” was George Baciu, who has worked at Grand Hotel Continental for over a year.

Card sharp: Credit Europe Bank launched its display card on the local market,

issuing 10,000 Display MasterCard debit cards. The product heralds a new phase in security and payment card functionality. Each card has a small screen and one or more touch-sensitive buttons, which generate information (numbers and/or text) on the display panel.

Pitching in: Seventy volunteers from the Rompetrol Group and the Navodari community joined forces to transform a vacant plot of land into a sports arena for students, through the oil company’s national program for social responsibility “Together for Everyone”.

Rompetrol invested USD 10,000 in the project.

56 The Diplomat December 2011

events Lining up scholarships: Mobile phone operator Cosmote announced the winners of the second round of Scholarships Cosmote. Five more students in their first year of university will be granted financial support for a year of their graduate studies through a scholarship worth the RON equivalent of EUR 150/month, for nine months (October to June).

Highway hopes: The Romanian premier, Emil Boc, attended the opening of the building site for the Orastie-Sibiu motorway. At the event, the PM said that Romania’s economy was predicted to grow between 1.5 and 2 percent in 2011, easily meeting the 1.5 percent target.

New forest: Cargo-Partner in cooperation with Mai Mult Verde, a nongovernmental organization involved in environmental volunteer work in Romania, organized the planting of a small forest.

Every company employee planted a tree in the forest, which will be called Cargo-Partner, and which is now home to 100 trees.

New private hospital: Medical Minovici Development opened

the Minovici Medical Center in Bucharest, with an investment of EUR 2 million. The clinic is the first step in a major venture in the Romanian health system, which includes the opening, in just four years, of the University Hospital Medical Minovici City, a joint project with one of the most renowned hospitals in the United States. Investment in the future hospital is estimated at about EUR 300 million.

Sports car: Forza Rossa launched the Ferrari 458 Spider in Romania,

just two months after the World Premiere in Maranello and the official launch of the model at the Auto Show in Frankfurt. Derived from the 458 Italy model, the Ferrari 458 Spider has a rigid retractable roof, 570 horsepower and a top speed of 320 km/h.

Le Chef: Chaiyasith Srichom, also known as Lam, has been appointed executive chef for Athenee Palace Hilton’s outlets and banqueting services. He started his career in Verona, a well established fine dining Italian restaurant in Sydney, and then moved to Europe, first to London and then Prague, where he worked at Maze Prague by Gordon Ramsey, being promoted to sous chef. At Maze, the chef and his team earned themselves the highest of culinary accolades, a Michelin Star.

57

city life

Cirque du Soleil brings Saltimbanco to Romania International group Cirque du Soleil is coming to Romania for the first time, with the production Saltimbanco. Daily performances will take place from 8 to 12 February 2012, in Romexpo Bucharest’s central pavilion. Having started out in 1984 as a group of 20 street performers, Cirque du Soleil is now a major Quebec-based organization combining street entertainment with elements of the circus. Saltimbanco is the troupe’s longest-running show, having been staged repeatedly around the world since 1992, and undergoing a readjustment in 2007. Tickets are available from www.cirquedusoleil.com/ saltimbanco or through the Eventim network, Domo stores, Germanos, Orange, Vodafone and Humanitas bookstores. ■

Vienna concert offers festive refinement

A highlight of the Christmas concert schedule will be a performance by the Strauss Festival Orchestra from Vienna, under the baton of Peter Guth. Artists in the Viennese Orchestra are recognized internationally for their virtuosity and artistry, and are considered ambassadors of Vienna, the world capital of classical music. The show, which will take place at Sala Palatului on December 19, will aim to satisfy its audience aurally, visually and emotionally, through a diverse musical program including waltzes, marches, polkas, and, of course, a special collection dedicated to Christmas. The orchestra will be accompanied by top soprano Monika Mosser and the ballet corps of Strauss Festival Orchestra. Tickets cost from RON 50 to RON 200. ■ 58 The Diplomat December 2011

Adamo fans look forward to Knight of music Salvatore Adamo will perform at Sala Palatului in Bucharest on December 10, in a show organized by Project Events in collaboration with European Event Services.

The set list is likely to includes hits such as Sans Toi Ma Mie, Tombe la Neige, Monsieur Permettez Vous, La Nuit and Dolce Paola, which have captured the hearts of fans and risen up the music charts. Adamo, who sings in nine languages, has sold over

100 million records worldwide throughout his career. As well as the devotion of fans from around the world, Adamo has also been garlanded by His Highness, King Albert II of Belgium, who knighted the singer and composer in 2001. Tickets for the concert cost between RON 100 and RON 350 and are on sale in Adevarul bookstores, Diverta, Flanco, Magazinul Muzica, Sala Palatului and online. ■

Stefan Banica celebrates decade of Christmas gigs Romanian singer Stefan Banica will perform the tenth run of his Extraordinary Christmas Concert this year. The extravaganza will take place nightly from December 14-16, at Sala Palatului. The singer has said that 2011 is a special year because it marks ten uninterrupted years of his Christmas concerts, meaning he has created a tradition. Fans from around the country, and even some from abroad, attend the singer’s shows. Over the decade, Banica has used his ever more popular festive gigs to debut hits. Tickets for the concert are available from Sala Palatului, Comedy Theater, Foarte Mic Theater, Ion Dacian Operetta Theater, Unirea Store, Unirii 2 subway station, Carrefour stores and online. ■