Business Review Issue 19/2012 May 28 - June 3

Interview: Daniel A. Rosner, director of the luxury division at Global Eye Investments, talks about the opening of the first local Burberry store and other projects the investment fund is preparing to roll out »page 12

ROMANIA’S PREMIERE BUSINESS WEEKLY

May 28 -June 3, 2012 / VOLUME 16, NUMBER 19

AGRICULTURE FORUM

BETTER USE OF EU FUNDS, INCENTIVES TO REDUCE TAX EVASION, AND MORE KNOW-HOW WILL HELP CULTIVATE THE LOCAL AGRICULTURE SCENE, PLAYERS TOLD A BR EVENT »PAGES 6-7

NEW TAX SPREE! The cabinet has a raft of fiscal changes in store that could hike the country’s minimum wage and change the flat tax. Market players shared their response »page 8-9 NEWS

LINKS

LINKS

FILM

Green scene

Auction action

Social assistance

Family fortunes

The number of green certificates granted to renewable energy producers could stay the same until 2014, under a state bill » page 4

As the upcoming bidding process for telecom licenses nears, operators voiced their concerns over prices and losing spectrum » page 10

Orange’s Yann Gourvennec reveals how companies can best use social media and what mistakes they typically make » page 11

The First Beautiful Thing is a very Italian comedy-drama about a dysfunctional mother and son. BR’s film critic went along » page 14

www.business-review.ro Business Review | May 28 - June 3, 2012

NEWS 3

NEWS in brief DEFENCE Romania teams up with 13 NATO members to buy 5 surveillance drones

ENERGY Transgaz SPO to be carried out in late June The secondary public offering (SPO) for Transgaz, the state-owned gas pipeline operator, has been scheduled for late June, while the initial public offerings (IPOs) for three power generators should also take place this year, Lucian Isar, minister delegate for the business environment, told Reuters last week.

Romania is pursuing an ambitious privatization program under the EUR 5 billion stand-by agreement with the IMF, European Commission and World Bank. Minority stakes in state-owned enterprises (SOEs) are due to be sold on the Bucharest Stock Exchange (BSE). The country also wants to appoint private managers and implement corporate governance at SOEs. The first private manager will be appointed in June, according to economy minister Daniel Chitoiu.

GDF Suez takes out over EUR 14 mln of EU funds to expand Bucharest gas network French gas supplier and distributor GDF Suez Energy Romania will use RON 65.9 million (around EUR 14 million) of EU financing to build 70.4 km of new medium-pressure gas pipes in Bucharest, taking the total modernized network to 395.7 km.

Economy minister Daniel Chitoiu last week signed the financing contract for the project, which is included in the fourth axis of the EU program that aims to increase energy efficiency and secure energy supply.

INVESTMENTS Hyosung Corporation to build USD 150 mln car parts plant South Korean Hyosung Corporation plans to start building works on a USD 150 million plant that manufactures car tires and airbags, according to officials from the Romanian Ministry of Economy.

Amway Romania opens local business center Direct selling company Amway Romania has invested USD 370,000 so far this year in opening a business center in Bucharest and launching a new internet platform.

“The main objective behind this USD 370,000 strategic investment is to offer our distributors a professional place where they can bring their clients or partners in order to present the company,” said Ioana Enache, general director of Amway Romania. The business center covers 600 sqm and is located in Bucharest, on Pipera Road.

LEGISLATION Telephony and internet providers must store clients’ data for six months The Chamber of Deputies has approved the bill regarding the storage of personal data processed by telephony and internet providers, also known as the Big Brother law. The bill requires internet, mobile and fixed telephony providers to store certain personal data concerning their clients, which will be sent, on demand, to the authorities for use in the prevention, investigation and prosecution of serious crimes, for six months.

Landline and mobile phone networks will have to store: the number of the caller, the number of the call recipient, the number of the person that the call was directed to, as well as their names. Internet networks will have to store: the user, the telephony service used, the number of the caller and of the receiver, the name and address of the subscribers and the equipment they use, under the bill.

ONLINE PayU expands to Russia, Ukraine and Turkey

PayU Romania has recently exported its online payment solutions to Turkey, Russia and Ukraine, the company has announced. The main clients in Turkey are shopping club Markafoni and Zizigo, the largest online footwear store. Turkey has 35 million internet users and is described as very open to modern payment methods. Russia and Ukraine, the most recent markets where PayU has expanded its footprint, have 76.7 million potential clients.PayU also has operations in Poland, a country with 24 million internet users.

PROPERTY Sky Tower reaches 100 meter mark The Sky Tower building, part of Floreasca City Center (FCC), currently under de-

velopment by Vienna-based developers Raiffeisen Evolution, has reached the 100-meter mark. The Sky Tower building will reach a total height of 137 meters.

By the end of 2012, the first two parts of the FCC district development are set to be completed. Construction of the SkyTower started in May 2011. Since then the tallest building in Bucharest has been growing by about one floor per week. The future tenant, Raiffeisen Bank Romania, will occupy seven floors of the tower and the entire FCC Office. All the remaining floors in the office tower will be leased by RPHI.

TELECOM Vodafone Romania reports EUR 812 mln revenues in financial year 2011/2012 Vodafone Romania, the country’s second largest telecom operator, posted revenues of EUR 812.1 million in the 2011/2012 financial year, ended March 31, 2012, down 2.7 percent on the previous year. The company had a total customer base of just over 7.9 million in March, marking a decline of 1.2 million on the previous year due to “the continuous disconnection of inactive prepay cards throughout the year but also following the introduction of new standards in customer base reporting which excluded M2M SIMs and other fixed data services,” said the company in an official statement.

The company’s EBITDA reached EUR 302.9 million, 1.4 percent down on the previous financial year. The ARPU was EUR 7.1 for the entire financial year 2011/2012.

TRAVEL Thomas Cook Neckermann signs all-inclusive agreement with local seaside hotels Some 5,000 German tourists will visit the Romanian seaside this year through tour operator Thomas Cook Neckermann, 1,000 of whom will choose all-inclusive packages, according to Mediafax. The company, which is returning to the local market after six years, has signed several all-inclusive agreements with hotels on the Romanian coast.

This includes 50 rooms each at the Amiral and Comandor hotels in Mamaia which are part of the Unita Turism chain owned by Josef Goschy, 30 rooms in the Europa hotel owned by George Copos and the five-star Saturn hotel in the resort of the same name which is managed by THR Marea Neagra, the company which manages SIF Transilvania’s hotels.

The Romanian Black Sea resorts continue to be a relatively unknown destination for German tourists, who are more familiar with their Bulgarian counterparts. Prices too are often cheaper in Bulgaria especially when compared with Romania’s high-end Mamaia resort.

Courtesy of Maguay

A group of 14 NATO members including Romania will buy five unmanned aerial vehicles (UAVs) that will be used for ground surveillance and intelligence missions, under the Alliance Ground Surveillance (AGS) system developed

by NATO. Northrop Grumman, the US defense contractor, will provide the drones in a deal worth EUR 1.2 billion signed during the NATO Summit in Chicago. The contract between Northrop and NATO includes the purchase and maintenance of five Block 40 Global Hawk drones equipped with a sensor that provides ground radar imagery.

Hyosung is a large industrial conglomerate that operates in heavy industrial systems, industrial materials, chemicals, textiles, construction and international trade business.

3Q Eduard Pughin

operations manager, Maguay Maguay has just launched the first Romanian range of ultrabooks. What countries do you plan to export them to?

The simplest option would be to approach countries around Romania: the former Yugoslavia, Hungary, the Republic of Moldova and Bulgaria. The distance is very important as we are currently in the process of building a network of technical support partners. What needs to be done is also to define and finalize the products since at the moment only one of the presented models of ultrabooks is already on the market: I am referring to U1401i, which we presented as the cheapest on the market at USD 510 (no VAT) for the basic configuration.

Maguay posted a turnover of EUR 14 million in 2011.

Where does Maguay assemble these products?

These products are made by us, as are all our systems. We assemble limited series right at our headquarters or subsidiaries.

Outside the projects, we deliver built to order: the client orders and we execute it. We don’t produce for stock; we only have the components. The components are imported and are probably produced in Asia, in Thailand, China and Taiwan. 95 percent of the entire IT production worldwide is done there. For bigger projects, we have a big assembly warehouse that we use in partnership with an electronic plant located in Alexandria. In Romania there are a lot of former plants with personnel with knowledge of working with electronic equipment.

This story about many of the warehouses having been built for assembling computers is just a story, because in order to be modern and efficient, one does not need huge spaces and you need not build something for potential projects. You can just use what already exists.

What has your experience on the public sector been?

Quite recently we won a public auction to deliver 150 notebooks at the Court of Accounts. My colleague who went there to take charge of the contract was told straight: “Let us not beat around the bush.

We don’t really like you and you should not have been the winners.” But we signed a contract, and the law is the law. otilia.haraga@business-review.ro

www.business-review.ro Business Review | May 28 - June 3, 2012

4 NEWS POWER

Parliament may delay green certificate reduction to 2014

Blue skies ahead? Players are awaiting clarification of the green certificates scheme

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he number of green certificates granted to renewable energy producers is likely to remain unchanged through to 2014, according to a bill to be voted in Parliament, although the energy regulator (ANRE) will ask the government to cut certificates in overcompensated technologies, said specialists last week at the launch event of the Romanian Photovoltaic Industry Association.

Emergency ordinance 88, which amended renewable energy law 220, has already been approved by the Senate and includes a provision that protects technologies that may be receiving too many certificates, mainly solar.

It should receive a final vote from the Chamber of Deputies in the coming weeks.

Romania currently has 2 MW of installed solar capacities but over 800 MW has the technical connection permit (ATR), although little will materialize due to lack of financing, according to Zoltan Nagy, general manager at the energy regulator ANRE. Photovoltaic is currently granted six green certificates (GCs) but the decreasing price of this technology has increased the investments return rate (IRR), leading to overcompensation that cuts the number of certificates.

The investment price for 1 MW in solar ranges between EUR 2 million and EUR 2.5 million.

ANRE has been analyzing renewable projects over the past few months and will issue a report this June stating if a certain technology yields 10 percent over the approved IRR. In that case, the technology would be overcompensated and ANRE will ask the government to cut the number of green certificates for that source. The IRR of 11.6 percent in solar

has already been exceeded and producers can now recover their investment in four years instead of seven.

“If we cut the GC on a certain source we will not go below the IRR, to fit in with rates approved by the European Commission. If for photovoltaic, with an investment of EUR 2 million, it results that the 11.7 percent IRR can be obtained with 4.25 GC, this is what will be proposed to the government,” explained Nagy.

He added that the annual maintenance costs for 1 MW of solar are around EUR 30,000 to EUR 38, 000, while variable balancing costs stand at around EUR 10 per MWh. The price of green certificates is likely to go down in the coming years, as the mandatory quotas of renewable energy in total consumption will be met. Last year, Romania had a quota of 10 percent and achieved only 3.7 percent of it. This year, the quota increased to 12 percent, while consumption will be close to 7 percent, according to ANRE estimates. It should be 20 percent by 2020.

Specialists say the country will have an oversupply of GC once the quota is met. This will drag prices towards the lower limit of EUR 28 for one certificate, which is valid for 16 months. Closing deals for the acquisition of green certificates and power purchasing agreements can be a solution according to Nagy.

“Already, there are many energy suppliers who are obliged to buy these certificates that want to close such contracts for six to seven years,” said Nagy. The GC support scheme runs for 15 years.

Romania had 1,681 MW of renewable energy capacities in April, according to Transelectrica, the grid operator. More than 1,200 MW was in wind. ∫ Ovidiu Posirca

www.business-review.ro Business Review | May 28 - June 3, 2012

NEWS 5

FINANCING

EIB financing in Romania to reach EUR 600 million in 2012

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he European Investment Bank (EIB) expects to sign loan agreements worth EUR 600 million this year, and will continue to support small and medium enterprises (SMEs) and middle capital companies looking to invest in energy efficiency and renewable energy, according to Plutarchos Sakellaris, EIB vicepresident responsible for Romania.

EIB lending in Romania stood at EUR 917 million last year, out of which EUR 465 million went on the second section of the future line 5 of the Bucharest subway.

Investments in the broadband mobile network got EUR 150 million. A EUR 14.4 million loan helped to fund R&D activities in automotive metal applications. The energy sector got EUR 158 million, for environmental works at the Paroseni coalfired thermal power plant and improving energy efficiency on 365 apartment buildings in Bucharest.

The EIB is the long-term lending institution of the EU, owned by member states, and heads of states are currently discussing a capital increase for the bank, which has a triple A rating. “This year our program will see a reduction in the over-

all level of lending that we will be doing in the EU,” said Sakellaris. EIB lending in Romania fell by 34.5 percent year-on-year in 2012.

Romania recently entered into technical recession after the economy shrank in two consecutive quarters by 0.2 percent and 0.1 percent in Q4 2011 and Q1 2012, and this impacted the lending to the corporate sector which is close to stagnation.

“Lending activity in the first quarter of this year was dramatically reduced. Market growth in the first quarter was 0.3 percent,” said Wolfgang Schoiswohl, Banca Comerciala Romana (BCR) vice-president.

BCR signed last week a EUR 50 million loan agreement with the EIB. The market growth in corporate lending was 8.3 percent in 2011. The bad winter conditions and the underperforming economy led to this drop, according to the BCR vice-president. “In Romania, many good companies who would have the muscle and the capability to expand are waiting and want to see how the economic environment develops further,” said Schoiswohl. ∫ Ovidiu Posirca

WHO’S NEWS Business Review welcomes information for Who’s News from readers. Submissions may be edited for length and clarity. Get in touch at simona.bazavan@business-review.ro

Anthony C. Hassiotis is the new country CEO and CEO of Bancpost, starting in July. He is succeeding Peter M. Weiss, who has decided step down for personal reasons. Over the past eight years Hassiotis has been country CEO and CEO of Postbank in Bulgaria.

Before this, he was president of the administration council and CEO of General Bank in Greece and vice-governor and vice-president of the administration board of Greece’s Agricultural Bank. He previously worked as country manager of the Barclays Group and CEO of Barclay’s bank in Greece. Hassiotis spent 17 years at Citibank in the US, Saudi Arabia, Venezuela, Costa Rica and Greece. He also held management positions with Mellon Bank in Pittsburgh, US, and London, UK.

Zhanat Tussupbekov

Marina Zara is the new marketing director of IT&C retailer Flanco. She is taking over from Violeta Luca, who has moved on to become the company’s deputy CEO. Zara has over 17 years’ experience in marketing. A graduate of the Bucharest Polytechnic Institute, she also is a graduate of the Asebuss MBA program, with specialization in marketing and finance.

Misu Negritoiu the CEO of ING Bank Romania, has been elected chairman of the advisory board of Maastricht School of Management (MSM) Romania. The new board has been elected on the basis of the international experience of its members as well as their local expertise in the business environment.

It will contribute to the improvement of the Executive MBA program run by MSM Romania. The advisory board meets on a quarterly basis to discuss the curriculum of the EMBA program, the students’ development and the mission of Maastricht School of Management Romania.

Romanian renewable energy market 2012: five investment ‘traps’ in the local photovoltaic sector As we are enterDoing the due diligence is extremely ing the summer, it important. A very large number of projis more than clear ects at the contact stage have not and that the interest in will not be finally sold, due to issues the Romanian resuch as: a) having the wrong technical newable energy study, and b) having an unclear consector is growing. nection contract. Other projects have One by one, the been developed with the sole purpose largest European of being sold, rather than being actumarkets have beally constructed. Some projects face come oversatuserious problems with their documenand tation (e.g. I have found a “7 MW project Ilias Papageorgiadis rated investors are which can supply just 5.6 MW to the searching for new opportunities. Rogrid”). The fact is that a large number mania is on the top of their list. of due diligences have been concluded Wind energy is currently the leader of without success. Investors should the Romanian renewable energy marnever underestimate this parameter, ket, however photovoltaic (PV) energy no matter how much the other party is is expected to “rebound” this year. Alpressuring them to buy quickly. though there are just a few PV projects 5. “You can construct at a very low installed thus far, it is estimated that in cost” the following 18 months, 200 – 300 MW This is correct under the conditions will be added in installed capacity. that the panels bought are “weird, noThe growth potential for the PV seg- name” ones, the inverters “speak a lanment is strong, however there are five guage you don’t understand”, the “traps” that investors should be aware structures are considered a “bargain” of before investing in their project: and the EPC is “a good guy who gives 1. “Calculating the expected income me the real prices”. Under such terms, using the maximum prices” it would not be a surprise that an inMany “consultants” insist that the vestor will pay only EUR 1 million / MW prices of green certificates will remain or even less. However, remember that at the maximum level for most years of there are court files for companies that the investment, even for the entire 15- delivered “painted panels” in Spain year period. To avoid this trap, serious (producing nothing), while in Greece investors use an “average price” to calthere are companies currently in the culate the expected income and search courts for having installed 20-30 perfor the right PPA agreements. cent less capacity than what they actu2. “A new PV project may be delivered ally signed a contract for. To avoid this in three months’ time” trap (especially for long-term investThis is an absolute lie. Those consult- ments of e.g. 15 years), investors ants claim this in order to receive the should carefully select the right mateadvance payment from the investor and rials and experts in EPC and ensure then either disappear or search for that every step of the investment is never-ending excuses. If one goes under control. Importantly, emphasis through all the legal processes, it is alshould be given to acquiring the official most impossible to buy a land today verification and related insurance. and obtain all required permits for a PV Overall, the Romanian photovoltaic project in less than six months or to be segment is expected to boom over the more accurate, nine-twelve months. following months. The winners of this 3. “You can still buy land and develop investment era will be recognized for your own project” their careful plans and strategic steps, The trap suggesting that it’s a very simthe correct structure of their deals, seple process to transform plain agricullection of appropriate partners, choice tural land into “potential PV projects” of quality materials, know-how, pacontinues to attract investors. It aptience and perseverance. Only the pears that the vast majority of investors “hard way” will secure your success in believe that a project can be easily de- the Romanian green energy segment. veloped, by simply buying a cheap piece The experience from the boom era in of land in any location. Serious conreal estate shows us what happened to sultants will inform you that the vast the ones who chose the “easy way”… majority of transformers with available capacity are already reserved.

What is your opinion?

(Exception: Owning properties with easy connection to the grid or transIlias Papageorgiadis former, lands or buildings) CEO More Real Estate Services 4. “Checking a PV project is simple” www.more-group.eu

ADVERTORIAL

35, became the new CEO of Rompetrol Group effective May 21, replacing Saduokhas Meraliyev who will remain a member of the administration board. Prior to his appointment, he was general director of KazMunaiGas’s refining and marketing operations. Tusupbekov has worked in the oil and gas industry since 2005, holding executive positions at the Kazakh firm. He was executive director and deputy general director of KazMunaiGas’s refining and marketing operations and general director of the distribution arm of the company KazMu-

naiGas Onimderi. He is a graduate of the Faculty of Legal Science at the Karaganda State University and the Faculty of Economic Science within the Gumilev Eurasia University. He received a master’s degree in the chemical technology of organic substances at the University of Technology and Business in Kazakhstan.

PARTNER CONTENT

www.business-review.ro Business Review | May 28 - June 3, 2012

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Farmers call for fiscal incentives and know-how Romania must make better use of the EU funds it receives, put in place the fiscal incentives to reduce tax evasion and invest in know-how – these were some of the conclusions of the first edition of the Focus On Agriculture event organized by Business Review last week. Participants shared their experience and views on how challenging and also how profitable it is to invest in Romanian agriculture. ∫ SIMONA BAZAVAN Romania’s agricultural output amounted to roughly EUR 20 billion last year, but it has the potential to reach EUR 40-50 billion, said Valeriu Tabara, member of the Agriculture, Forestry, Food Industry and Specific Services Committee in the Chamber of Deputies and a former agriculture minister.

He told the audience that agriculture has been on an upward trend in Romania in the past couple of years which will continue this year too. In his opinion the sector has the potential to play a greater role in the Romanian economy if it is approached as a priority and continuity is ensured.

One of the main topics discussed by participants was the reform of the future Common Agricultural Policy (CAP) for 2014-2020 and its implications for local farmers.

The draft bill proposes an increase in direct payments for Romania as along with several other EU members but also additional measure such as a special support scheme for small farms and young farmers which will be beneficial to Romanian cultivators.

There are also considerable challenges ahead, warned Achim Irimescu, secretary of state at the Ministry of Agriculture and Rural Development, especially for the small, local farmers who make up the majority. Making better use of the money received from the EU, integration and the creation of producers’ associations are a must in order to survive, he urged.

Coming up with viable solutions to fight the high levels of tax evasion in this industry should also be a priority as this is a vicious circle that condemns many farmers to underdevelopment.

Local farmers reap higher direct payments Direct payments for Romanian farmers should grow from about EUR 120 per hectare this year to EUR 180 per hectare by 2016, said Irimescu.

“Romania started in 2007 with direct payments worth 25 percent of the EU average, and under the present scheme of gradually increasing these funds, we will reach EUR 180 per hectare by 2016, although the EU average is EUR 270 per hectare. After the reform of the CAP we will reach EUR 200 per hectare, which is an actual growth of only 7 percent,” he said, adding that there is no deadline

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1. Top agricultural players got together to debate the future of the industry 2.

Nicolae Hristea, president of AgroBiotechRom 3. Dana Bucur, agribusiness consultant 4. Liviu Rusu, Food Safety director, ANSVSA 5. Raluca Daminescu, director of Methodology, Monitoring, Reporting and Institutional Relations department, APIA 6. Dorin Cojocaru, general director APRIL 7.

Achim Irimescu, secretary of state, Ministry of Agricultural and Rural Development

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to reach convergence with the EU average.

Out of the money it receives from the European Agricultural Guarantee Fund for the Single Area Payment Scheme, Romania has absorbed EUR 3.12 million since 2007, meaning about 57 percent of its allocation, said Raluca Daminescu, director of the methodology, monitoring, reporting and institutional relations department of the Payments and Interventions Agency for Agriculture (APIA).

The draft for the CAP for 2014-2010 proposes to reduce discrepancies between member states in the levels of payment stipulated by the current legislation.

About seven EU countries could enjoy increased direct payments, including Romania. However, the proposal to even out direct payments between member states also means that some states, such as France and Germany, which presently receive some the highest sums per hectare, will get less than they do now.

Given the present economic context and the fact that the countries that

receive the highest per hectare payments are also the biggest contributors to the EU budget, there is political pressure in Brussels to reduce the scale of redistributions and even cut the funds for direct payments in a number of countries including Romania, said Irimescu.

He added that this is unlikely to happen and the Romanian government is taking the necessary steps in order to receive the same funds for rural development and increase the sums for direct payments during the fiscal period 20142020.

Irimescu said that Romania started in 2007 with a low level of direct payments due to its low yields.

On one hand this was caused by the droughts in ’98 and ’99, but another factor was the high level of tax evasion, with many farmers not reporting all of their production. The level of direct payment per hectare was calculated at that time as yield per hectare multiplied by EUR 63.

In the EU, subsidies represent about 60 percent of the final value of agricultural products.

Also discussing the future CAP, Veronica Toncea, general director of Fondul de Garantare a Creditului Rural, said that for the 2014-2020 period, measures for rural development could be accompanied by financial engineering solutions in order to increase fund absorption and even insure against risks by setting up mutual funds.

GMOs versus organic farming Participants also discussed the more controversial issue of cultivating genetically modified organisms (GMOs). Nicolae Hristea, president of AgroBiotechRom, argued that given the increasing demand for food, the EU should reconsider its position on this matter and allow farmers to use the technologies they consider fit. Liviu Rusu, food safety director at ANSVSA, said the issue of GMOs has become political in the EU, when in fact scientists should have the final say. Not everyone, however, agreed that GMOs are a solution, not even in the case of the growing world population and a similarly increasing demand for food.

Present at the event, Marian Cioceanu, president of the Bio Romania Association, said in the long run organic farming remains a more viable solution.

www.business-review.ro Business Review | May 28 - June 3, 2012

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All photos: Mihai Constantineanu

1. Veronica Toncea, general director, Fondul de Garantare al Creditului Rural 2. Valeriu Tabara, member of the Agriculture, Forestry, Food Industry and Specific Services Committee, Chamber of Deputies 3. Teodora Alecu, director KPMG Romania, Tax Department 4. Victor Emanuel Ciuperca, Area Manager, AMB Holding 5. The panel featured major investors in local farm businesses 6. Financing and know-how are their role in boosting the local market came under discussion 7. Andrei Barbu, owner Cosul de Legume 8. Camelia Sucu, owner Piata de Gros 9. Cristian Onetiu, owner BIO Logistic 10. Marian Cioceanu, president Asociatia Bio Romania

He pointed out that organic farming has been on an upward trend in Romania in recent years.

Local farmers’ growing interest in this niche segment comes from both increased demand for organic products, local and international, and from the fact that those looking to convert from conventional production to organic have been receiving financial support for several years now. Last year alone the number of organic farmers grew three fold, said Cioceanu.

And although less than one percentage point of the country’s arable surface is officially organically cultivated, Romania is among the top fifteen organic exporters in the world, although it mainly exports raw materials. But this too could change, he said.

Cioceanu was not the only one confident that organic farming is looking at considerable future growth in Romania.

Cristian Onetiu, owner of BIO Logistic and two other companies dealing with the distribution and retail of organic products, stressed that organic products are not only healthy and environmentally friendly but are also good business.

His three companies have reported sales of about EUR 15 million and a 15 percent EBITDA in the last few years.

Andrei Barbu, who owns Cosul de Legume (The Vegetable Basket) and is an entrepreneur turned farmer, after having previously worked in the IT industry, thinks that developing extensive agriculture, for example as in Brazil, and therefore using GMOs is not a solution in

Romania’s case.

In his opinion, specializing in the production of quality products rather than large quantities and building a national brand around this is not only more sustainable but can also be equally profitable.

Challenges ahead Participants also tackled fiscal topics related to agriculture in Romania. Local businesswoman Camelia Sucu, who owns Piata de Gros, a wholesale market for agricultural products in Bucharest, said VAT remains an issue in this industry.

One of the main reasons why agricultural products are expensive and tax evasion represents a burdensome share of the entire market is the high level of VAT, which hampers competitiveness and stimulates the black market.

“We are the only country in the EU that has 24 percent VAT for food. Hungary, for example, which has general VAT higher than Romania’s at 27 percent, has a much lower level for food,” said Sucu.

Other related fiscal issues, including transfer prices, were presented by Teodora Alecu, director in the tax department of KPMG Romania. She explained how in the case of transfer prices, setting up local commodities exchanges would help.

Local taxes too can be an issue, added Victor Emanuel Ciuperca, area manager of AMB Holding, an Austrian investor in local agriculture.

The average investment in setting

up farm infrastructure and buying the necessary equipment for 1,000 hectares of land is around EUR 1 million, he estimated.

Local taxes paid for this infrastructure in most cases reach the maximum level allowed by the law and reductions or fiscal incentives are almost never applied as in most cases local authorities see investors as an opportunity for income rather than an opportunity for the community, he explained.

But the challenges an investor faces start long before getting to pay local taxes. They begin with buying the land.

Not only is land fragmentized, so its consolidation takes time and a lot of patience, but in most cases there are rampant irregularities with the ownership deeds and documentation.

In addition to all of these issues, a big problem remains the mentality in rural areas and the general attitude towards change, which makes things difficult, said Dana Bucur, agribusiness consultant and the event’s moderator.

She concluded that this is something that will surely change in time as the industry itself has evolved considerably in the past twenty years and will continue to do so.

The land problem Romanian farmland – the quality of the soil, its abundance, but most of all its low price tag – has caught the eye of foreign investors in the past few years, despite problems such as land fragmentation.

However, the market is not yet ready to be liberalized from 2014 as prices con-

tinue to be too low compared to the rest of the EU, which would lead to speculation, said Tabara, a supporter of delaying the date from which foreigners can buy local land.

Representatives of the government have previously said that pushing back the deadline beyond the end of 2013 is almost impossible as this would mean renegotiating Romania’s Treaty of Accession to the EU. Tabara does not agree. He thinks that Romania can and should restrict farmland acquisition until at least 2020 when the market could settle. This can be done through a moratorium of extension, he explained, adding that there are precedents and this could be implemented.

Some of the participants argued however that such a measure would be justified as prices for local land cannot be expected to reach the same levels as in Western Europe where subsidies too are considerably higher.

The fear some players harbor that foreigners will buy up the country is unfounded if not ridiculous, said some of the investors present at the event, arguing that those who have bought land so far, through Romanian-registered companies, are making investments locally, bringing much needed know-how and hiring local specialists.

Moreover, Romanian companies that are in fact controlled by foreign citizens and have bought land locally pay taxes for it, added others.

simona.bazavan@business-review.ro

www.business-review.ro Business Review | May 28 - June 3, 2012

8 MONEY

Tax attack: government proposes raft of fiscal changes Romania is heading for changes in the tax area if the November elections see the governing coalition returned to power. The Ponta cabinet has announced several fiscal propositions ranging from reducing income tax for lower earners to reduced VAT on food products and higher taxes for profitable oil and gas firms from 2013. BR surveyed tax specialists to gauge the potential impact of some of the proposed measures. ∫ OVIDIU POSIRCA The ruling social liberal coalition (USL) formed a new government earlier this May, headed by Victor Ponta, after the Ungureanu regime lost a no-confidence vote after being in office for less than three months. Some of the first measures adopted by the Ponta government include hiking public sector salaries, which were cut by 25 percent in the summer of 2010, and the return of social contributions paid by seniors with pensions of over RON 740 (around EUR 160), which were ruled unconstitutional. The healthcare insurance contribution of 5.5 percent applied to all pensions exceeding RON 740, instead of taxing only the resulting surplus.

The government and the IMF agreed in the letter of intent that an 8 percent increase in wages would come into effect in June, and another 7.4 percent in December 2012. The pension contributions will be returned through to 2013.

Lucian Isar, delegate minister for the business environment, said last week that no tax reduction measures were foreseen in the next six months, but the government is working on a provision that doesn’t tax additional profit made by companies this year.

“It means no taxation for profit which exceeds what was produced in a certain period, let's say 2011, or some quarters of it. Basically, it is an incentive system for the private sector to produce more than it did in 2011 or if they can't do that at least to post a larger profit,” said Isar.

The fiscal code will be changed this year in order to meet the demands of the IMF and European directives, but no budgetary changes will be made in the next six months, according to Liviu Voinea, state secretary in the Ministry of Public Finance.

Gains for low earners PM Ponta said during a recent television appearance that the government was planning to keep the 16 percent flat tax, but adopt a progressive element so that people on lower incomes pay 8 or 12 percent. Labor minister Marian Campeanu said the coalition wants to increase the minimum wage by 14 percent to a gross RON 800 to RON 840 (around EUR 180) in 2013. Part-time workers earning below the minimum wage will be taxed at 8 percent, while those making up to RON 1600 (around EUR 350) would pay 12 percent. Income exceeding this value will be taxed at 16 percent. In addition, social contributions (CAS) paid by employ-

Taxing conundrum: the government is lining up a series of fiscal changes

ers would be cut by 5 percent.

The USL said these measures would be implemented only after the parliamentary elections scheduled for this November. Recent polls suggest the ruling coalition is likely to remain in power after autumn.

“The introduction of a progressive decreasing tax system will not negatively impact the middle class, but will create a more generous framework for disadvantaged categories, and so is a good initiative,” said Mihaela Mitroi, partner in fiscal consultancy at PwC. She added that cutting CAS to 5 percent would generate new jobs and fuel economic growth through increased consumption and investments.

Romania is currently consolidating a fiscal system in an economy that doesn’t allow a large capital accumulation by people, so the 16 percent flat tax allows easy management and fast collection, according to Raluca Bontas, senior manager in global employment services at Deloitte Tax. She adds that reducing the tax burden on the less well off while maintaining the flat tax can be done through a deduction system to achieve this goal without fundamentally changing the system, while a progressive system would increase budgetary costs and raise less money.

Uncertainty surrounding the final sum collected would be another draw-

back of this system, suggested the manager.

“For instance, the state could find itself in the situation where a taxpayer has an income taxable at 16 percent in one month, but may not earn any income in the following months, so the accumulated income would enter into the lower tax bracket, let’s say 12 percent. Therefore at the end of the year, the state would have to issue a rebate, meaning the collection during the year may not be reflected in a ‘real’ growth of collected revenue,” explained Bontas.

Romania’s fiscal revenue from taxes and social contribution was 27.2 percent of GDP in 2011, 12.4 percent lower than the EU average, according to the think tank Fiscal Council. The figure was 36 percent in Hungary and 32.1 percent in Poland.

A 5 percent decrease in CAS or a capping of this contribution paid by employers would encourage companies to pay their debts to the state budget or cease to use undocumented labor, but would also attract investors and make room for wage increases, argued the Deloitte manager.

Food ‘needs lower VAT’ The government plans to tackle the endemic fiscal evasion in agricultural products by lowering VAT in this area to 9 percent. “Those who present invoices and

sell legally regain from the budget 15 percent, while only 9 percent remains in the budget,” explained PM Ponta. He added that all EU members, apart from Denmark and Romania, have a differential rate for food products. The current VAT for food products in Romania is 24 percent.

Daniel Constantin, minister of agriculture and development, estimated tax evasion in the agricultural sector at EUR 2.5 billion.

“By introducing a 9 percent VAT rate for basic food products, fiscal evasion in this sector would be reduced by 15 to 20 percent,” said Mitroi of PwC. This would discourage potential fiscal evasion in fruit and vegetables, as the profit would be small, although it would not bring food prices down, she argued.

Some EU members have a VAT rate for food products below 5 percent. VAT on food is 4 percent in Italy and Spain, 4.8 percent in Ireland and 5 percent in Cyprus and Poland, while Luxemburg charges 3 percent.

Vlad Boeriu, indirect tax manager (VAT) at Deloitte Tax, suggested that an efficient measure for reducing fiscal evasion in VAT could be the application of reverse taxation on domestic transactions, which involves not paying VAT on the commercial chain, something that is already happening in grain and waste.

Cutting VAT to reduce tax avoidance for certain types of products needs to be supported by clear legislation, according to Ramona Jurubita, tax partner at KPMG. “The law must be very specific and detailed in defining the products for which the reduced rate is applicable, to prevent taxpayers attempting to broaden it to cover other similar products,” said the partner.

Oil and gas firms to be divested of deregulation spoils Gas prices in Romania will be deregulated between 2013 and 2018, both for companies and households consumers. The government believes this will bring significant profit to oil and gas companies and so is looking at ways to tax them. The tax revenue will subsidize vulnerable consumers, who will be defined in the new energy law.

Authorities are also planning a bill that will regulate royalties in the oil and gas sectors for 2015-2024. These measures were agreed by the government in the letter of intent with the IMF. Romania has a EUR 5 billion stand-by agreement with the IMF, World

www.business-review.ro Business Review | May 28 - June 3, 2012

MONEY 9

Courtesy of Deloitte

Courtesy of Deloitte

Courtesy of KPMG

Courtesy of PwC

Mihaela Mitroi, partner, fiscal consultancy, PwC Romania

Ramona Jurubita, tax partner, KPMG

Raluca Bontas, senior manager global employment services, Deloitte Tax

Vlad Boeriu, indirect tax manager (VAT), Deloitte Tax

Bank and European Commission.

Economy minister Daniel Chitoiu said earlier this month, during hearings in Parliament, that the level of royalties and taxes on mineral resources is 0.8 percent of GDP in Romania. Neighboring Bulgaria charges 7 percent of GDP, while in the EU it varies between 4.5 and 9 percent. The minister wants OMV Petrom to pay higher royalties by 2014, and if negotiations fail, the ministry will consider a tax on exceptional revenue.

OMV Petrom, which was privatized in 2004, reported a profit increase

of 72 percent to EUR 887 million in 2011.

Earlier this year, the Competition Council slapped several oil companies with a combined fine of EUR 205 million, for removing a cheaper gasoline product from the fuels market. The transgressors were OMV Petrom, Rompetrol, Mol and ENI. However, OMV Petrom was accused of initiating the cartel and got the largest share of the fine, around EUR 117 million.

The government also wants to reduce the price of gas so has started negotiations with oil and gas firms. “I am

sure the respective companies can reduce their profits by investing in Romania’s future,” said Ponta in a recent televised appearance. The price of Euro-super 95 gas with tax has jumped by 4.3 percent since the start of this year to EUR 1.283 per liter on May 21, according to data from the European Commission.

Governments worldwide choose to tax extractive industries, which exploit natural resources, and this is done by overtaxing profits, according to the PwC partner.

The UK has an additional tax of 32 per-

cent (a windfall tax) on exploitation and production activities, while in the US companies pay a compensation tax for onshore/offshore extraction, which varies depending on the state. This is added to exploitation royalties and an income tax of 35 percent.

In Venezuela, additional tax represents 33.33 percent of the extracted oil, while Brazil has a special tax of between 10 and 40 percent for the exploitation/concession of oil deposits.

ovidiu.posirca@business-review.ro

www.business-review.ro Business Review | May 28 - June 3, 2012

10 LINKS

Hammer time: telecom operators prepare for auction With the upcoming auction for telecom licenses approaching and a new minister taking the communications helm, there are several issues to be resolved. Starting prices, dubbed too high by some actors, have still not been approved by the government while other operators are concerned about losing spectrum they already own. ∫ OTILIA HARAGA For now, the authority has chosen not to disclose the proposals pitched by the operators just yet, stating that it will present its position and the final version of the documentation in a meeting of the Consultative Council, after the government adopts the license taxes.

But the operators have chosen to make some of their views public. “One element we discussed was temporary licenses. Instead of granting these for only 15 months, they should be prolonged,” Dorin Odiatiu, public affairs, partnerships and wholesale director at Orange, tells BR. From Orange’s experience on other markets, “We do not know of a similar case, in which spectrum that is already being used is auctioned for only 15 months. The auctions for spectrum should ensure predictability and equal conditions for competitors.”

Orange has proposed that only one auction be organized this year, for a period of 15 years. “If an operator loses the spectrum it owns today in the auction, it would have time to reconfigure its network by April 2014. We believe our solution offers benefits to all parties involved – the Romanian state, new entries on the market, current operators and, most of all, to customers,” says Odiatiu.

In reply, ANCOM says that the decision to share usage rights for frequencies in the spectrum of 900 MHz and 1800 MHz in two stages – 15 months and 15 years – came as a result of consultations in which Orange and Vodafone expressed concern regarding possible inequality in the auction process, if it had been organized for an equal 15 year period for all the frequencies that must be cleared over the coming period.

“At the end of last year, the two operators were concerned that organizing the auction like that would be to the advantage of the operator who has usage rights for these frequencies until April 2014. They argued that potential participants would be less interested in acquiring the respective spectrum than the spectrum that would be freed sooner,” says Marinescu. The “clock auction” procedure proposed by ANCOM will be an adaptation of the system used in countries such as Switzerland, Austria, the Netherlands and Denmark. The Authority promises that “no matter which model is used in Romania, the bidding will be transparent, equitable and fair.”

On this, Orange had a word to say, proposing a securized web application to administer the entire auction process.

One important point is that after the auction, operators will be in the position to offer 4G services in Romania. “Shortly after the licenses are available we will be ready to launch 4G services. Orange has already carried out some tests for 4G and we believe that the transition to this technol-

STARTING PRICES* Licenses allocated for 15 years (2014-2029) EUR 35 mln per block in 800 MHz EUR 40 mln per block in 900 MHz EUR 10 mln per block in 1800 MHz EUR 4 mln per duplex block in 2600 MHz EUR 3 mln per simplex block in 2600 MHz Licenses allocated for 15 months EUR 3.4 mln per block in 900 MHz EUR 800,000 per block in 1800 MHz

*Starting prices proposed by ANCOM must be approved by government decision

Spectrum specter: operators are concerned about how the auction will affect them ogy can be made in a relatively short time,” RCS&RDS have repeatedly expressed concern.

Odiatiu tells BR. “We believe that every cent that operaSimilarly, Inaki Berroeta, CEO of Vodators must pay to acquire spectrum is at least fone, previously said that if there is a propone cent fewer that is available for invester distribution of the spectrum, if continuity ing in new networks and services,” argue of services and predictability of investCosmote Romania officials. ments are guaranteed and costs are reasonable, the company “will invest in and “Taking into consideration the Romanian GDP and mobile telephony ARPU, the relaunch 4G services this year.” quested starting fees for spectrum licensElsewhere, RCS&RDS is also very ines are significantly higher in comparison terested in providing 4G services. “We with the requested license spectrum fee will certainly want to acquire licenses for during all the other similar recent auctions the lower frequencies of 800 MHz and 900 in other European countries,” said officials.

MHz. We will probably also bid for other liCosmote Romania has already voiced this censes in the 1800 MHz and 2600 MHz point of view to the authority. ranges. Our goal is to supply 4G services to Since this is an auction that is open to our clients,” said Valentin Popoviciu, busiboth existing players and new entrants, ness development director at RCS&RDS. He complained that at this point his firm “the conditions should lay the groundwork for good prospects for all, including for the is not competing on an equal footing with existing operators, which have invested bilother companies since it does not have aclions in this country. All requirements cess to the 900 MHz frequency, which have a direct and definitive impact on the impairs its activity. business evolution of the operators; and we Marinescu gives his assurances that should all carefully analyze all aspects,” the conditions of the auction “will allow the urges Cosmote. procurement, by one or both operators, OrSimilarly, RCS&RDS has also been comange and Vodafone, of the entire quantity plaining about the starting prices, arguing of spectrum they currently own, allowing that they are not in accordance with the at the same time an operator who does not have spectrum in the 900 MHz frequency, conditions on the market.

“The starting prices are too high. ANCOM RCS&RDS or a newcomer, to obtain the should encourage competition and leave spectrum it wants.” prices at a lower level,” Popoviciu of “If all the spectrum put up for auction is RCS&RDS said previously. “Romania is sold, the Romanian state could cash in EUR the most competitive market in Europe, 700 million,” Marinescu told the media. The with an ARPU that is indeed small in comwinners must pay for the licenses by July parison to other European countries. How2013. Payment can no longer be made in inever, when you compare the ARPU you stallments. should also compare the purchasing powHowever, the matter of the starting prices does not sit well with some operators. er.” Also, licenses should be paid for in installments, not all at once, according to While Vodafone and Orange did not comPopoviciu. However, ANCOM argues that ment to BR on this issue, Cosmote and

prices were calculated “in such a way that they can reflect the circumstances on the Romanian market.”

“The proposed levels are justified objectively via the technical-economic characteristics of the radio frequencies for which licenses are granted. They allow the recovery of the costs of freeing the spectrum,” says Marinescu.

Prices are also comparable with the values from auctions in other EU states, he adds.

What is certain is that the auction is a crucial event on the telecom market for the next 15 years. “After the auction, we could witness the reconfiguration of the market following the appearance of some foreign operators or virtual mobile operators, but we cannot anticipate the results,” says Marinescu.

In all likelihood, the market will see a reconfiguration of the spectrum. Some operators may face losing part of what they currently own.

This does not daunt Marinescu, who says the final user has been taken into consideration. “Even if some operators have to migrate to other frequencies after the auction, users will still continue to benefit from mobile communications services,” he says.

In the case of the top two operators, this is about the parallel usage of the 900 MHz, 1800 MHz and 2100 MHz frequencies.

“The superior frequencies are excellent in covering urban areas with a high density of users and a high volume of traffic. Moreover, in the case of the 900 MHz spectrum, in order to use it to increase 3G coverage, it was necessary that 5 MHz be freed for UMTS in a very short time from the total of 12,5 MHz. Practice has shown us that when there is a will, reorganization of the network can take just a few months, and users are not affected,” says Marinescu.

otilia.haraga @business-review.ro

www.business-review.ro Business Review | May 28 - June 3, 2012

INTERVIEW 11

Social media crises ‘reflect what is wrong with your company’ Knowing yourself, staying focused and being “you” might sound like so many self-help clichés, but they are solid principles when it comes to social media. Yann Gourvennec, director for web, digital and social media at Orange Group, shared a few pieces of advice on how to build awareness in social media and manage a crisis effectively. ∫ OTILIA HARAGA

What can a Romanian company do to build brand awareness in social media?

First and foremost, know one’s brand and use social networks consistently with regard to your image, and your overall marketing strategy.

Secondly, don’t shift your focus from business to social media: obviously, social media should support your business by enhancing your brand experience, awareness and/or visibility. If it distracts you from doing business, then don’t do it.

Thirdly, focus on content: if you are in b2b, it will have to be very professional (indepth articles about your visions and technical prowess for instance). If you are in b2c, your content has to be essentially entertaining, mostly on Facebook, on which users rarely want to be bothered with serious stuff but are more interested in games, polls and interaction.

Courtesy of Orange

What trends have you identified in corporate social media management lately? Do they apply to Romania too?

First, social media is reaching maturity and is no longer considered an innovation. Second, barring a few exceptions, social media is now part of everything we do, and has become an integral part of digital marketing; b2b is no exception – on the contrary.

Digital marketers who have failed to delve into the nitty-gritty of social media have missed something big and they had better catch up.

Lastly, social media is no longer restricted to a particular team within the digital department; it can be used by each and every one of us in business. Very few companies are an exception to this rule. The impact on b2b marketing might even be more important than that on b2c marketing, however counter-intuitive it may seem.

As for Romania, we are talking about a country in which there is already a very high level of IT knowledge and expertise.

There are even some international hightech giants that are Romanian, such as Bitdefender, so it would not be right to treat Romania as separate from the rest of the world.

Having said that, there are real regional differences in social media adoption both quantitatively and quantitatively, but the results of these discrepancies are sometimes surprising. Looking at the profile of the users of the Orange Worldwide page you might be very surprised to learn that CEE users amount to more than 35 percent of our overall users: Poland is by far the biggest fan base in our portfolio, but Romania is not very far behind in proportion, given it is a smaller country. More than 5 percent of our users are Romanian, in fact.

CV Yann Gourvennec

Fourth, be yourself: there is nothing worse than bombastic boasts (such as “we are the leaders!” mostly when it’s not true and you are only leader of a niche, and therefore not a leader) or salespeople trying to sell their wares on social media.

Think of keeping your readers/users and customers happy first, and then think of yourself. Be simple and natural, and when you produce content make it interesting for them, and not for you. Lastly, “socialize” your website: not by multiplying Facebook buttons, but by making your (interesting) content easier to share.

How can companies manage a crisis with the help of social media?

Despite what most people think, and despite the usual romantic stories told about internet crises and rumors, managing crises is a long-term rather than short-term exercise. Crises in social media reflect what is bad about your company, not what is wrong with your community management or the way you handle it. Here are my five tips for managing crises.

Fix internal problems first: things that you do in your day-to-day business may be kept hidden, but not in social media. Eventually, social media reveals more about the way that you are organized internally than about anything else.

Secondly, work on the process: if you are responding to events as a crisis arises, and then building the process as it happens, it means that you have done something wrong. You should work on that process from day one, before a crisis takes place.

Thirdly, make your PR go social: don’t put all your eggs in the same basket; your PR and social media departments should work hand-in-hand. There is nothing that the community management team should

do without referring to PR when a crisis arises, and vice versa, there is nothing that PR is aware of that should not be communicated to the community management team, inclusive of the stances which have to be taken and displayed. Don’t take the Lone Ranger approach by letting community managers express themselves in the name of the company even though they haven’t received clearance for it. This applies to large companies and mostly listed companies, for which external communications are extremely critical, and may not be applicable to smaller enterprises.

Fourth, prepare for the worst to happen outside normal working hours: my experience of crises online has shown that the worst problems often occur on a Friday night from 8 pm onwards or during the weekend, or at night. Work with vendors in order to set up round-the-clock moderation when necessary, in multiple languages when you are a worldwide company.

Fifth, set up your alerting system: not to generate alerts in real time all the time, but to alert you to problems in real time when it is really necessary.

All these are applicable to companies with strong brand awareness, though are most relevant to large companies. Listed companies rank high on the agenda with regard to crisis management issues and the need to industrialize the process around them.

What do you think the ratio for the implementation of social media campaigns should be in the company’s entire media budget?

Social media marketing has to be thought of in the long-term, not in the short term.

My recommendation would be to build engagement and then spend money, not the other way round. Each time I am in charge

April 2011 Director, web, digital & social media, Orange Group 2008-June 2011 Head of internet and digital media, Orange Business Services July 2005-January 2008 Innovation principal, Orange Business Services January 2003-June 2005 Business partnerships manager, France Télécom Corporate Solutions June-December 2002 'Value Selling': High level engagement, France Télécom Corporate Accounts 1999-2002 Director, e-business & business development, France Télécom FCR 1997-1999 Senior consultant, Cap Gemini (France/Lebanon/Hong Kong) 1995-1997 Consultant, marketing strategy & internet, Unisys France & UK 1992-1995 Business systems manager, Unisys Europe Africa 1988-1992 Business systems manager, Unisys France 1985-1988 Sales executive, Philips France

of a new digital department, I start working on my content strategy and building the content, both externally and internally, which will fuel my digital strategy. Once I have done that, I can start to crystallize communities around the content which we have created, as well as adapt the content to the liking of our audiences. The second step is to grow the network so that it reaches a critical mass. The third stage is to create synergies between the pages and the different platforms that we use.

Once I have sorted out all my budgets, and made considerable savings, then and only then can I invest my money, with great care, on advertising to promote this content and bring back traffic to my main platforms.

My last recommendation would be to say to companies that they shouldn’t spend millions on word-of-mouth because wordof-mouth is supposed to be cost-effective; otherwise it is just advertising and advertising works best in traditional media.

My main frustration with regard to social advertising is to see that mainstream social media platforms have done very little to reinvent advertising so far. But this will probably change in the medium term, hopefully. Now that we have grown a critical mass, we might consider advertising to speed things up or bring them to the next level, but I do not expect those spends to grow out of proportion and much in excess of 10 percent of my overall budget, in the very long run.

otilia.haraga@business-review.ro

www.business-review.ro Business Review | May 28 - June 3, 2012

12 INTERVIEW

Burberry checks into local luxury market Daniel A. Rosner, director of the luxury division at the investment fund Global Eye Investments, tells Business Review about the entry of iconic British brand Burberry, famed for its classic check, onto the local market and explains the main differences between the Romanian luxury scene and other similar markets worldwide. ∫ ANDA SEBESI How would you describe the Romanian luxury market at present compared with other high-end markets in Central and Eastern Europe?

The current Romanian luxury market is comparable with those in CEE even though Romania is below the average in the region for the number of brands present in other countries and the consolidated value of the market.

Is the entry of Burberry a sign of the local luxury market’s maturity? What were the firm’s main reasons for coming to Romania now?

After a year of negotiations with Global Eye Investments, Romania was also in-

How would you define the local luxury consumer and how different is he or she from the equivalent in Western countries?

The Western luxury consumer is much more sophisticated because he or she has been exposed to luxury for much longer.

Thus, he or she knows how to articulate preferences and expectations better than the Romanian consumer.

What are your plans for the local market as regards launching new stores or projects?

Global Eye will also develop another two projects – a Techno Gym showroom (the company is the distributor of the premium fitness equipment producer in the country) and a multibrand store selling luxury accessories and shoes.

Fashion retail is not quite an unknown issue for Global Eye Investments.

It has also had a Sport Couture store (of 1,000 sqm) in its portfolio since May 2011, a multibrand with both “diffusion” collections (second line) of the large luxury brands and premium lines from Nike, Adidas and Puma.

This required an investment of EUR 750,000 and has the potential to reach annual sales of EUR 2-2.5 million.

The company also operates the fran-

Courtey of Burberry

What can you tell us about the first Burberry store in Romania? How well do you think it will be received by Romanians?

Burberry is an iconic British brand that has a history of over 156 years and that is attractive at international level because of its innovative spirit.

Our 500-sqm store within Radisson Blu Complex was opened on March 19 this year and officially launched at the beginning of May. It reflects exactly the Burberry store design concept developed by the chief creative officer, Christopher Bailey, using British materials and themes throughout.

LED flat video walls showcase the Burberry digital content controlled by the brand’s headquarters in London. The collections available in Bucharest are Burberry Prorsum, London, Brit, Childrenswear and Accessories along with the following clothes categories: women’s wear, menswear, children’s wear, non apparel, eyewear, fragrances and watches.

cluded in Burberry’s plan for expansion.

It is a corporation with businesses worth EUR 10 billion that built its brand in panes and colors of red, black, cream and white.

The opening of the Burberry store in Bucharest is the result of a EUR 1.5 million investment without the inventory.

It is a natural consequence of a maturing market and is in line with the global development strategy of the brand.

chise of two Adidas monobrand stores in Romania.

How big do you think the impact of opening the Burberry store will be on the local market?

Competition always has a positive effect as it leads to both the settlement and sophistication of a specific market.

What are the latest trends in the luxury industry at international level and why are they slow to appear on the local market?

Luxury has many valences in plenty of fields.

While Romania is somewhere in line with the international trends in fashion, the level of sophistication of services here is decades behind.

anda.sebesi@business-review.ro

COMPANY PROFILE Burberry at a glance Headquartered in London and a member of the FTSE 100.

1856 – Thomas Burberry founds the company at the age of 21 with the aim of producing innovative functional outwear 1909 – The opening of the store in Paris 2008 – The opening of the new global headquarters in London 2009 – The opening of the American headquarters

www.business-review.ro Business Review | May 28 - June 3, 2012

AGENDA 13

BUSINESS AGENDA May 28 12:00 Wu Xing organizes a press conference to mark the launch of a new range of products and a new brand strategy at Golden Tulip Times Hotel. By invitation only.

May 28 11:00 The Romanian Association of International Pharmaceuticals Producers (ARPIM) and the Association of Generic Pharmaceuticals Producers in Romania (APMGR) organize a press conference on the clawback tax at Novotel Hotel. By invitation only.

May 29 âˆŤEVENT 09:00 BR organizes the third edition of the Focus on Employment conference at Howard Johnson Grand Plaza Hotel.

Representatives of public authorities, legal and tax experts, along with HR managers will gauge the main issues of the labor market. By invitation only.

11:00 PostMaster organizes a press conference to present its outlook on the postal market at Radisson Blu Hotel. By invitation only May 30 Law firm Tuca Zbarcea & Asociatii organizes a seminar on the fiscal implications of enforcement obligation and the

assignment of debt at City Plaza Hotel, Cluj-Napoca. The event will also address the impact of the new Civil Code and the new Civil Procedure Code. By invitation only.

May 31 10:00 Bosch Group organizes a press conference to present its 2011 financial results at Crowne Plaza Hotel. By invitation only.

June 7 10:00-18:00 The English Bar organizes through the Honorable Society of the Inner Temple the Law and Ethics Conference at the Central Universitary Library. By invitation only.

June 11-12 Bancpost organizes the delegation and business forum Go International, entitled Greece-Romania: At the Confluence of Regional Commercial Synergies, at JW Marriott Hotel. The event is supported by the Chamber of Commerce and Industry of Romania and the Hellenic-Romanian Chamber of Commerce and Industry.

June 13 AvocatNet.ro awards gala 2012, which rewards the best performing law firms and consultancy firms during 2011, is organized at Crystal Palace Ballrooms. By invitation only.

www.business-review.ro Business Review | May 28 - June 3, 2012

14 CITY FILM REVIEW

CULTURAL EVENTS AGENDA MUSIC Control Day Out 2 June 1, Arenele Romane, 19.30 Control Day Out 2 powered by TuborgSound invites two British bands, Wild Beasts and O.Children, and two from France, Woodkid and The Shoes, to bring their indie art-rock and electropop music to Bucharest for the first time.

The concerts will last at least five hours and the organizers have promised highclass entertainment.

Green Hours International Jazz Fest June 1-4, Green Hours The fourth edition of Green Hours International Jazz Fest brings artists from Poland, Norway, Denmark and the UK to Bucharest. The shows that make up this contemporary jazz festival are entitled: 3 is a Good Number, Ghost writer’s joke, Mahala, Baboon Moon, Balcan Tree, Walking Dark, Spitalulamorului.ro and Solo Guitar Project.

an alien from assassinating his friend Agent K and changing history.

Director: Barry Sonnenfeld Starring: Will Smith, Tommy Lee Jones On at: Movieplex Cinema Plaza, Samsung IMAX, Hollywood Multiplex, Cinema City Cotroceni, Cinema City Sun Plaza, Cinema City Cotroceni VIP, Patria Cinema Street Dance 2 Opens May 25 Things fall apart: Micaela Ramazzotti as struggling young mother Anna

EXHIBITIONS Bucharest International Biennale of Contemporary Art Until July 22, Pavilion (Info Point of Bucharest Biennale) The fifth Bucharest Biennale (BB5) seeks to promote awareness and dissemination of culture. The main exhibition is curated by Anne Barlow (UK/USA), executive director of Art in General, New York, under the theme, Tactics for the Here and Now. Bookfest Until June 3, Romexpo (sectors C1, C2, C3, C4, C5) Bookfest, an annual event organized for keen readers, will take place at Romexpo between May 30 and June 3, with an extensive program that includes book launches attended by well-known writers as well as releases of CDs, debates and roundtables, exhibitions and autograph sessions. France is the honorary guest country at this year’s Bookfest. The French Embassy in Bucharest and the French Institute will welcome to the event, along with journalist Bernard Pivot, the producer and host of such shows as Apostrophes, Bouillon de Culture and Double je, several well-known French writers: Dominique Fernandez, Michel Houellebecq, Nedim Gürsel, Sylvie Germain, Yasmina Khadra, and Yann Appery.

DEBBIE STOWE

Italians. They do: family, flamboyance, fashion, food, gesticulating, shouting, drama. And they do all of that and more in The First Beautiful Thing (La Prima Cosa Bella), a very Italian family comedy-drama.

Sexy, shallow and vivacious, the film’s heroine Anna was born to live la dolce vita.

Unfortunately Anna is married with two young children, commitments to which, despite her best efforts, she is manifestly unsuited.

We first meet Anna when she is the surprise winner of Livorno’s “most beautiful mother” contest, 1971, where she is being drooled over by mustachioed sleaze balls, to the consternation of her hotheaded mustachioed husband. (I did say it was very Italian.)

This spectacle is the last straw in Anna and Mario’s already volatile marriage, and he violently throws her out of the family home. The film then follows events of the next decade, as Anna’s beauty and naivety lead her into various undesirable situations as she struggles to provide for her children.

Interspersed with those scenes is the present-day narrative, which sees Anna’s poorly adjusted adult son, royally screwed up by his unsettled childhood, reluctantly return to Livorno to try and make peace with his mother before she succumbs to cancer.

It sounds soapy, and there are some rather melodramatic and corny scenes.

But what raises it above tele-novella level is the film’s huge heart, humanity and comedy. Not to mention some sur-genre acting.

The First Beautiful Thing is frequently funny, thanks in large part to a quality turn from its lead, Valerio Mastandrea. He is spot on as the dysfunctional, depressed and dope-smoking middle-aged college professor, weary and wary of his trying family. Despite the comic aspects of the role, he gives Bruno pathos and credibility. Anyone from an imperfect family (and is anyone not?) will sympathize.

Mastandrea’s co-stars are Micaela Ramazzotti and Stefania Sandrelli, as the past and present versions of Anna. Investing her character with likeability, strength and maternal urges (if not the accompanying skills), Ramazzotti makes young Anna more than a ditzy bimbo, and shows her range as the wide-eyed young mother is gradually stripped of her illusions and innocence.

Her performance segues into Sandrelli’s nostalgic patient whom terminal illness has not robbed of her zest for life and optimism. And as Bruno’s sister Valeria, Claudia Pandolfi illustrates another way in which Anna’s life choices have left their scars on her kids.

Director Paolo Virzì does not saying anything profound with his movie, and the themes and plotlines are well rehearsed.

But it’s well made, warm and engaging.

Both the 70s storyline and modern-day Anna’s decline are absorbing. It may be soap, but this is superior soap. Italian style.

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Director: Paolo Virzì Starring: Valerio Mastandrea, Micaela Ramazzotti, Stefania Sandrelli, Claudia Pandolfi On: Grand Cinema Digiplex Baneasa A group of breakdancers from across Europe learn the secrets of latin dance in order to win a dance-off against the world champion crew, Invincible.

Director: Max Giwa, Falk Hentschel, George Sampson, Sofia Boutella, Stephanie Nguyen Starring: Tom Conti On at: Movieplex Cinema Plaza, The Light Cinema, Hollywood Multiplex, CinemaPRO, Cinema City Cotroceni, Cinema City Sun Plaza, Glendale Studio, Scala Cinema, Cinema City Cotroceni VIP

PERFORMANCE

Man in Black III Open May 25 Will Smith’s Agent J travels back in time to MIB's early years in the 1960s, to stop

Japanese Culture Days Until June 2, Odeon Theatre Odeon Theatre is staging a week of Japanese culture with photo exhibitions, calligraphy, tea ceremony, kimono presentations and other Japanese objects, as well as kagura dances, ikebana demonstrations, piano and drums night, WA (Harmony) dance show and also theatre performances. The event will include a demonstration of mime techniques in classic theatre, Dojo-Ji, held by Makoto Inoue of Prague on May 31. The public can also attend Japanese cultural workshops from May 30 to June 2.

ISSN No. 1453 - 729X

FOUNDING EDITOR Bill Avery EDITOR-IN-CHIEF Simona Fodor SENIOR JOURNALIST Otilia Haraga JOURNALISTS Simona Bazavan, Ovidiu Posirca COPY EDITOR Debbie Stowe COLLABORATORS Anda Sebesi ART DIRECTOR Alexandru Oriean PHOTO EDITOR: Mihai Constantineanu PHOTOGRAPHER Laurentiu Obae LAYOUT Beatrice Gheorghiu

FILM PREMIERS

The First Beautiful Thing