Business Review No. 21, June 7

LINKS: Jean-Francois Fallacher takes over the reins at Orange Romania from departing CEO Thierry Miller. Drawing on his experience on both the corporate and mass markets, the incoming head says Orange will focus on new strategies for growth »page 9

MONEY ROMANIA IS NOW TECHNICALLY OUT OF RECESSION, POSTING A 0.6% HIKE IN Q1. BUT THE REALITY ISN’T QUITE SO SIMPLE, EXPERTS TELL BR

ROMANIA’S PREMIERE BUSINESS WEEKLY

»PAGE 6

June 6 - 12, 2011 / VOLUME 16, NUMBER 20

NEWS

Greek drama Romtelecom looks set to merge with Cosmote after the economic woes in its homeland persuaded Greek group OTE not to make an offer for the remaining Romtelecom shares » page 4

American investment in Romania is now approaching USD 1 billion – despite the lack of transparency and predictability, says US Ambassador to Romania, Mark Gitenstein

NEWS

Market recovery Healthcare services provider MedLife is opening a EUR 13.5 million pediatrics hospital in Bucharest, the country’s first such private facility » page 4

»page 10-11

FOCUS

The hard cell

RESTAURANT Bringing some embassy experience to the local culinary scene is Chez Marie, whose patron cooked for successive UK Ambassadors.

BR gives it a taste test » page 12

Photo: Laurentiu Obae

USD 1 BILLION AND COUNTING

Stem cell insurance is the next step on this incipient medical sector, with Danish firm Stem Sure getting the ball rolling » page 7 INTERVIEW

Many strings to his bow The proud custodian of a coveted Stradivarius violin through to 2012, innovative local performer Alexandru Tomescu is making it his mission to bring music to the masses » pages 13

www.business-review.ro Business Review | June 6 - 12, 2011

NEWS 3

NEWS in brief

3Q Michael Sternberg

WEEK in numbers Photo: Laurentiu Obae

14 million RON (approximately EUR 3.3 million) is the net profit reported by the Property Fund in the first quarter of this year

Denmark’s ambassador to Romania

From your experience so far, what are Romania’s major issues and what can be done to attract more investors here?

I think the Romanian government is trying to do many things in this direction. Your economy was like our economy, like most of Europe, in a time of crisis. Actually, Romania is not doing as badly as many other European countries. However, the outstanding issue here is good governance, or corruption. Within the last year, Romania has been doing more than before. Of course, there is also the Schengen issue. So I think that respect for the law and a clear and transparent legal system are important issues for Romania.

What would you say are Romania’s most positive aspects and when do you see the country emerging from the crisis?

The people – they are so well-educated and can speak many languages and I am very impressed by this. People here can speak English, French, Italian, Spanish, etc.

People are very educated and want to work, to do something. Although we have 300 Danish companies here, there are only a handful of Danes – all the firms are administered by Romanians and we are very satisfied with that. I think that Romania is emerging from the crisis. You are returning to positive growth, not as much as one would like, but the economy is turning around. We are not completely out, but compared to other countries in Europe, you are not doing that badly. corina.dumitrescu@business-review.ro

16 Agerpres

What is the latest news regarding Danish investments in Romania?

We just created a business association about three months ago and the response has been very, very good, much better than I had expected. We have 70 members so far and we plan to be quite active. It’s a very diversified community, there are a lot of investments in agriculture for example. I think that Danes are probably involved in about 1.5 percent of all agricultural land in Romania (pig farming, crop production, this kind of things), as well as transport, maritime transport, harbor administration, sustainable energy, all kinds of areas. I cannot really estimate the entire value of Danish investments in Romania, but it’s quite big. I’ve only been an ambassador here since the start of the year, when I came from Thailand, and the business association has just been started. I had not expected such a large and active community, however.

IMAGE of the week Here’s Silvio...

The Italian prime minister, Silvio Berlusconi, was in Bucharest last week on an official two-day visit for the second intergovernmental summit between Italy and Romania. He met his local counterpart Emil Boc and President Traian Basescu, who welcomed “the visit of a friend to Bucharest.” Berlusconi said he liked the country and its people, and mentioned the positive roles of the Romanian community in Italy and the Italian business community in Romania.

FMCG

CONSTRUCTION

LaColline plans EUR 1 mln sales for 2011

Cesarom puts EUR 14 million into Cluj plant

Local goat dairy producer LaColline has announced plans to reach EUR 1 million of sales this year.

The company has managed to double its turnover every year since 2007 when it was founded by Romanian entrepreneur Ovidiu Spinu based on his experience in France about 20 years ago.

In the first year Spinu invested EUR 500,000 in this niche business. He says new investments will be made this year to buy equipment and increase the production capacity of its factory in Cluj as well as to invest in a nearby goat farm.

Ceramic tile manufacturer Cesarom will put EUR 14 million into its Cluj-Napoca plant over the next three years. Investments will go into upgrading the technology in the Cluj plant, expanding the production capacity by inaugurating a new line, and the unit’s infrastructure and quality management.

The largest part of the investment is expected to go into the new porcelain ceramic tile line. This will be opened in 2012 and is intended to generate a 30 percent increase in Cesarom’s annual production capacity.

Investments for this year stand at EUR 4 million, and will go mainly into modernizing the decorative ceramic tile line, and bringing technological improvements to the plant.

Murfatlar aims to reach EUR 45 million turnover this year Local wine producer Murfatlar hopes to achieve a turnover of RON 185 million (approximately EUR 45 million) in 2011.

This will be RON 45 million more than in 2010, with the increase coming from sales generated by the development of its own retail network, Crama Murfatlar, the company has announced.

Murfatlar Romania has 3,000 ha of vineyards, making it the largest vineyard owner in the country. Approximately EUR 15.6 million has been invested so far in replanting 975 ha of vines, a process that will continue throughout 2011 with another 130 ha.

Somaco buys G&D Teius plant for EUR 4 million Somaco Grup Prefabricate, the manufacturer of prefab products, has bought the G&D Teius plant in Transylvania for EUR 4 million. The total investment in the plant will exceed EUR 6 million, and will cover, besides the acquisition price, the costs of expanding the product portfolio.

The plant bought by Somaco was a greenfield investment finished three years ago by Italian company G&D Prefabricatii. It covers a 50,000-sqm surface,

billion euros is the estimated value of local retail last year, according to Contrast Management Consulting

634 million euros was added to the Central Bank’s currency reserves in May

and the production hall is over 11,000 sqm.

The acquisition of the plant was financed by Somaco Grup Prefabricate shareholder, investment fund Oresa Ventures.

Henkel spends EUR 10 million on building third local Ceresit factory Henkel has announced that it will invest EUR 10 million in building a new adhesives and construction materials factory in Roznov, north-eastern Romania. About EUR 3 million of the necessary money will come from European regional development funds, according to Henkel representatives.

Although the construction materials market is estimated to have dropped by about 15 percent last year and another 4.7 percent in the first quarter of 2011, Andrei Dumitrescu, sales and marketing manager for adhesives technologies at Henkel Romania, said the local market still has huge potential for growth and the company expects the recovery of the Romanian economy next year.

The new factory should become operational in 2012 when it will have a production capacity of between 180,000 and 200,000 tons per year. It will cover mainly northern Romania as well as exports to the Republic of Moldova.

German firm Henkel operates another two Ceresit factories in Romania, one in Pantelimon near Bucharest and one in Transylvania at Campia Turzii.

www.business-review.ro Business Review | June 6 - 12, 2011

4 NEWS HEALTHCARE

TELECOM

MedLife opens EUR 13.5 mln OTE will not buy into Romtelecom, pediatrics hospital in Bucharest local operator to merge with Cosmote

Photo: Laurentiu Obae

Courtesy of MedLife

Yorgos Ioannidis, Romtelecom GM

MedLife’s new hospital is the first private facility for children in Romania

H

ealthcare services provider MedLife has opened a EUR 13.5 million pediatrics hospital in Bucharest. The facility is the first private hospital for children in Romania and is expected to see approximately 400 patients monthly, while bringing in EUR 4 million in revenues by the end of 2011.

The hospital offers integrated pediatrics services such as specialty investigations both in- and out-of-hospital, surgical interventions, imaging and lab in-

vestigations. The 5,200-sqm unit has six levels and a total of 132 beds.

The pediatrics facility is the third hospital in MedLife’s portfolio, after the Life Memorial hospital opened in 2007 and the MedLife-Genesys unit taken over in Arad at the beginning of this year.

Medlife is currently working on two other hospitals in Brasov and Bucharest as part of a EUR 45 million investment program for 2011-2013.

Staff

G

reek group OTE has announced that it cannot make an offer for the remaining Romtelecom shares, the Ministry of Communications has announced in a press release. OTE owns 54.01 percent of Romtelecom shares, with the remaining 45.99 percent in the hands of the Romanian state.

German telco operator Deutsche Telekom is also involved indirectly in the Romtelecom shareholding structure, as it holds 30 percent of OTE shares.

The state had announced its intention to sell its stock and asked OTE to make an

offer. Government officials previously said it expects EUR 1 billion for the stock.

The reasons for OTE’s decision not to buy are related to the continuation of the economic crisis in the region and in Greece, as well as OTE’s current debt reduction strategy. If circumstances change, the group will reconsider its position, according to the Ministry of Communications.

“OTE representatives believe the future of telecom companies is dictated by the development of the technology and the evolution of the needs and demands of consumers. In this context, they propose to immediately start the operations to merge the two companies Romtelecom and Cosmote,” read the press release.

As BR previously reported, the move was already in the cards, with Stefanos Theocharopoulos, currently CEO of mobile operator Cosmote, rumored to take over the management of Romtelecom as well. Currently, the local operator is led

by GM Yorgos Ioannidis. The letter from OTE also stipulates that if the Romanian government wishes to list the shares, partly or fully, on the stock exchange, then the group will send the necessary instructions to the Romtelecom management who will assist the ministry in this process, according to stipulations in the Shareholders’ Agreement. ∫ Otilia Haraga

IT&C

Senior Software acquires stake in ContentSpeed

S

Courtesy of Senior Software

enior Software, supplier of IT business management systems for SMEs, has acquired a 49 percent stake in ContentSpeed, a local producer of software for electronic commerce. The decision to buy was a response to the needs of its clients, both distributors and producers (most of which have sales in key accounts, traditional retail and Horeca) to expand their sales via the internet.

“We decided to offer them the complete specialized solution: ERP (Enterprise Resource Planning) combined with an online portal in the form of a One Stop Shop and the expertise of a specialist in the field,” said Daniel Toma, GM of Senior Software. The takeover of ContentSpeed by Senior Software will take place in several investment steps.

“The EUR 20,000 transaction will be added to an initial investment for 2011 which amounts to EUR 120,000, through which we will accelerate the growth of the company: 20 percent in infrastructure (headquarters and IT systems for business management), 40 percent in marketing services, financing, logistics and administrative, and 40 percent in HR (training and employment),” said Toma.

ContentSpeed currently has nine employees and by the end of the year the number will grow to 20. Its clients include Tara Fashion, Chicco, Indesit, Ariston, Dinamic92 and Eurotherm. The company posted a turnover of EUR 1.2 million in

Daniel Toma, GM of Senior Software 2010 and currently has 52 employees in Bucharest and Constanta, where it has based its operations work point. Its major shareholders are Daniel Toma and Lori Haiducescu.

Senior Software’s clients include UPS Romania, Walmark Romania, Consolight, Marelvi, Randler Group, Regency Company, Phoenix Contact, Rocast, General Parmafood, Apollo Mod Distribution, Koelner Romania, Velfina, Dinamic 92 Distribution, V-Tarus/Farmaceutica Remedia, Mirano International, KG Rulmenti, Sea-Bell Trading, Ficosota Sintez Romania, Akzo Nobel, EcoWater Systems Romania, General Parmafood and Cord Impex. ∫ Otilia Haraga

www.business-review.ro Business Review | June 6 - 12, 2011

6 MONEY ANALYSIS

Romania: recession free?

With estimated economic growth of about 2 percent this year, Romania has emerged from the recession but still has a long way to go to get through the current economic crisis. In order to help ensure sustainable growth, the government must develop a clearer and more predictable taxation system, say experts. will be felt by Romanians at the end of 2011,” says the analyst. He adds that Romania will register economic growth of about 2 percent this year, with sustainable growth for the Last month the National Institute of Stacountry on the medium term – the next tistics announced that Romania had three to five years – of 3.5-4 percent.” A emerged from recession, after the country more accelerated economic growth could posted a 0.6 increase percent in its GDP in bring about a macroeconomic imbalance, the first quarter of 2011 on the preceding which has already affected us in the past,” quarter. Prior to that, in the last quarter of cautions Cabat.

2010 the local economy inched up 0.1 perGibbins believes that to help ensure suscent from the third quarter of last year. This tainable growth, the government should means that Romania has registered growth develop a clearer and more predictable taxin two consecutive quarters which technically constitutes coming out of recession, ation regime. “The current system has become very complex and many investors according to commonly accepted ecospend a lot of time on tax administration, nomic principles.

It’s encouraging news for everyone, which potentially diverts resources from commercially productive activity. The govbut while the country is now back in ernment should try to avoid making growth territory after two and a half years changes to the tax system at short notice, of recession, the economic problems are far which can be destabilizing for business. In from entirely solved. “The country is out addition, the tax authorities should speed recession because of the high demand for primary industrial products from Germany, up the process of granting refunds when taxpayers are eligible for them,” urges GibFrance and other EU members. Many manbins. ufacturers from the EU focused on cutting Asked what Romania should do to encosts as a result of the current economic crisure sustainable long-term economic sis and the fierce competition from China growth, the KPMG representative says that and other emerging markets. Romania the government should considerably immanaged to get out of recession mainly beprove the rate of absorption of EU funds, cause of this increased demand from more advanced EU countries,” says Dragos Cabat, particularly for infrastructure projects. managing partner at efin.ro. He adds that “Large sums are available in EU funding which can be used Romania is among the for infrastructure last countries to projects, presentemerge from recession ing a historic opbecause of the restricportunity for modtive policies of the governization. This ernment. “In addition, gives the chance local consumption is not only for Romabased on credit and Romania’s quarterly increase nia to become more the remittances sent in the first three months competitive as an home by Romanians of 2011 against the investment destiwho work abroad,” he preceding quarter nation in the long notes. term, but also to aid Mark Gibbins, partner, head of taxation services at KPMG, short-term recovery because an EU-funded infrastructure development program strikes a cautious note, warning that just as would boost the economy and create jobs. a country can enter a technical recession by It would particularly benefit the construcregistering negative growth in two suction industry, which has been especially cessive quarters, when in fact other ecohard-hit by the recession,” says Gibbins. nomic indicators give a different picture, so In his opinion Romania presents many optoo can an economy enter a technical reportunities for investors, and he believes covery. “It is still too early to say whether Romania has truly emerged from recession, that this is a good time for businesses that and opinion is divided on the subject. may have been cautious about emerging markets since the start of the recession to Some economists think that Romania still look at Romania again. “While we are unhas some difficult years ahead and there are likely to see a return to the very high shortcertainly challenges, such as growing defaults on mortgage and consumer loans. term returns which many investors made in 2005-2008, there are many sectors with The budget deficit is still high and the potential for steady, long-term growth, government must maintain discipline to such as renewable energy, healthcare, pharfulfill the conditions of its agreement with maceuticals and tourism,” says the KPMG the IMF,” advises Gibbins. partner. In addition, Cabat predicts that exEmerging from recession doesn’t mean ports and services will continue to be the that Romania has passed the current downmain drivers determining Romania’s ecoturn. Cabat says that usually there is a gap nomic growth in the future. “Consumption, of about six to nine months between exitconstruction and agriculture will start their ing the recession and the moment when engines later and move at a lower speed,” he standards of living start to improve. “That’s concludes. why we can estimate that economic growth

∫ ANDA SEBESI

0.6%

www.business-review.ro Business Review | June 6 - 12, 2011

FOCUS 7

Stem cell insurance germinates on local market Stem Sure, the Danish stem cell harvesting company, has launched its product Stem Insurance, covering medical interventions with stem cells, with BCR Asigurari. Local parents opt to have cells saved in eight percent of births, compared to the European average of 2.5 percent and BCR Asigurari intends to sell 5,000 such policies this year. ∫ CORINA DUMITRESCU

Courtesy of Stem Sure

Bogdan Ivanescu, Stem Sure solutions president, attributed the relatively high take-up of stem cell harvesting services in Romania to his belief that Romanians, due to their Latin origins, are more “caring”. Another country of Latin origins, Portugal, sees stem cells harvested at 15 percent of total births. However, Portugal was the first country in Europe to adopt the service, it was revealed during the conference. Ivanescu added that Romanians are also very prone to adopting international trends.

The cost of the policy is EUR 204 per year and it covers treatments of EUR 100,000 involving four people – the child, his/her parents and a sibling. The EUR 100,000 ceiling was set as the cost of stem cell surgery is usually in the range of EUR 50,000-100,000 (most often for leukemia).

It also includes access to samples from other stem cell banks around the world.

In Romania, a stem cell transplant with cells harvested from the umbilical cord is not yet possible (and it is not yet known when this will change) and the services included in the insurance system are available at any clinic throughout the world. At Bucharest’s Fundeni hospital, about 300

Stem cell harvesting, a growing trend

stem cell transplants have been performed so far, since 2001, but only with mature cells, harvested from bone marrow.

Danish company Stem Sure carried out 350 harvests in Q4 last year on the local market, which can be translated into a turnover of EUR 350,000 for the period, putting the company second on the market. Throughout 2010, however, the firm’s total turnover reached slightly over 1 million. In 2011, Stem Sure aims to reach 50

percent of last year’s turnover, or EUR 1.5 million. The firm was licensed in Romania in 2009.

The local stem cell harvest market reached EUR 18 million in 2010. A 10 percent increase is expected this year, against an anticipated decrease in the birth rate.

Around 220,000 births were registered in Romania last year. Locally, Stem Sure’s main competitors are Cord Blood Center, Biogenis and Regina Maria.

Biogenis has announced that it will launch its own medical insurance service, on June 7, with Platinum and Asigest, with further information to be revealed then.

Cord Blood Center was the first to enter the local market in 2006 and estimates a turnover of EUR 5 million on a market share of 78 percent. The firm offers its own insurance system, through which the clinic covers EUR185,000 worth of financial support if the child needs treatment abroad.

Local health insurance market: not yet at full potential BCR Asigurari officials said that they had decided to partner Stem Sure to provide this service, because it is an innovative one and a “premiere” for the local market. The insurer recently returned to health insurance services, which it dropped in 2005.

“Treatment with stem cells and the Stem Insurance service represent an important step for Romanian society and for the health system in our country. Although for Romania it is a premiere, this product is a necessary step for a civilized, modern society,” said Mihail Tecau, BCR Asigurari VIG directorate president.

In 2010, the health insurance market reached an estimated RON 30.34 million, according to the National Association of Insurers and Reinsurers in Romania. In the first trimester of 2011, preliminary results showed a nominal growth of over 42 percent against last year. According to Carmen Radu of the association, “The evolution of the health insurance market in 2011 will very much depend on the comeback of the corporate sector, so we may have a growth of between 5 to 20 percent, a lot below this market’s true potential. The most sought after health insurance services are those that involve direct settlement between insurers and medical services suppliers, so that clients need pay only the insurance premiums, followed by those for children, surgical interventions and hospitalization and those offering coverage for treatment abroad.”

corina.dumitrescu@business-review.ro

www.business-review.ro Business Review | June 6 - 12, 2011

8 REAL ESTATE

PARTNER CONTENT

What is at the intersection of green energy and real estate? transaction. Indeed, one of the trickier aspects of wind farm development is to secure all necessary air rights on nearby land over which turbines rotate.

Most property in Romania suffers from some sort of title defect. But this should not necessarily kill a deal. It is important to assess the quality and degree of risk and be cautious of certain seductive legal arguments. A few examples follow:

Perry Zizzi, Partner, Clifford Chance Badea

With the recent peak in interest in wind farms in Romania, what is often lost in the rush is that beneath every turbine and cable and transformer is land. Essentially, developers of wind farms need to keep in mind that merely because their project relates to energy does not eliminate its essential characteristic as a real estate

1. The seller's lawyers tell me that a good faith buyer is protected against restitution claims. So am I not protected by acting as a good-faith purchaser?

The law is unclear as to the precise level of due diligence required to support a defense of good faith, and indeed good faith cannot be invoked in all cases.

2. Can buyers can rely on the fact that a notary authenticates the transfer deed?

Especially for investors from countries like France and Spain, where notaries play a more prominent and established role in transfers of real property, this idea rings true. But in Romania, authentication by a notary does not cure title defects or prove that none existed.

3. Our law firm has found a flaw in the title chain dating back many years, but the seller's attorney insists that after three years of registration in the Land Registry, title defects are cured. That seems logical, but what is the law?

Art. 36 of Law 7/1996 sets out the principle that certain title defects may be curable after three years of registration.

But jurisprudence is inconclusive as to the circumstances where this rule would apply. While there may be certain situations where this theory could mitigate risk, there is currently no consensus.

Being fully informed about real property title early in a transaction is the best

policy for ensuring a successful closing.

Too often, we see matters falter at inopportune moments as a lender suddenly discovers a serious title flaw that had been downplayed or ignored in order to obtain a financing term sheet or get approval by an investor’s principals or shareholders.

If title flaws are brought to light and honestly assessed, they can often be remedied or mitigated. Title insurance, which shifts some or most title risks to a third party insurer, can also keep closing on track if the insurer is brought in at an appropriate juncture.

Perhaps most important, however, is to engage competent, experienced legal counsel to assess and explain the title risks and advise on strategies to address those risks.

Perry Zizzi is Partner at Clifford Chance Badea law firm.

www.business-review.ro Business Review | June 6 - 12, 2011

LINKS 9

New CEO takes over at Orange Romania JEAN-FRANCOIS FALLACHER has been appointed chief executive officer of Orange Romania starting on July 1.

With a background on both the business and mass markets, he started his career in France on the business sales segment and later worked in the Netherlands where he launched an internet services company. The executive then started an alternative operator that was a competitor of KPN, the leading telecommunications and ICT service provider in the Netherlands. ∫ OTILIA HARAGA

Courtesy of Orange

Departing CEO Thierry Millet will return to France where he will continue to work for the France Telecom group, coordinating payment activities and the development of contactless payment services in countries where the group has a presence, one of the seven strategic programs announced by France Telecom CEO Stephane Richard on May 31.

“My six years at Orange Romania represent an important period in my career. It was a challenge to run the company during the economic crisis, having previously contributed to its rapid development from the position of commercial manager,” said Millet.

“The new position of vice president of payment and contactless in the group will be a change for me as I will have the opportunity to develop one of the most promising domains in the industry, which is still at the beginning of the road,” he added.

The incoming CEO outlined his vision for the company in Romania. “As a leader

Jean-Francois Fallacher is joining Orange Romania as CEO

on the communications market, Orange Romania will focus on providing clients with the best experience and quality of services. At the same time, we will dedicate our efforts to discovering new ways of growth and bringing an added value to the market,” said Fallacher.

Before coming to Romania, Fallacher was CEO of Sofrecom, an international consultancy company that is part of the France Telecom-Orange group, where he developed mobile operations and services on the various markets where the group is present. He attended the ESSEC Business School, Ecole nationale supérieure des Télécommunications and Ecole polytechnique.

Several weeks ago, Millet announced that Orange Romania planned to invest EUR 110 million this year in network expansion, increasing coverage of rural areas, launching new products and simplifying the customer experience.

“The EUR 110 million we will invest this year is more than we invested in Romania in 2009 and 2010,” said Millet during a press conference.

The outgoing CEO also announced

that Orange would invest between EUR 500 million and EUR 600 million in Romania by 2015, with the exact sum to depend on how the company is affected by external factors such as the erosion of financial indicators for the telecom market, lack of balance on the market, and most of all by regulations and other decisions made by the authorities.

The company will modernize its existing communications network in rural areas and supply broadband services to customers living in these areas.

“The project will start in June this year in the Ardeal area and will be completed at the end of 2012. The total investment will be EUR 100 million which will go on changing all the network elements in the respective areas. We will work with our partners Huawei, Alcatel and Cisco who will help us implement the internet speed which will be 14.4 Mbps. What’s more, the technology we will implement in this project is LTE ready,” said Madalina Suceveanu, chief technology officer of Orange Romania.

otilia.haraga@business-review.ro

www.business-review.ro Business Review | June 6 - 12, 2011

10 US INVESTMENT

US investors state their intentions the most attractive business environment,” he stated.

According to embassy data nearly 100 American companies have invested in Romania since 1990, which provide about 15,000 jobs. These investments are primarily in the areas of IT, automotive, food and agriculture, banking, insurance, hospitality, investment funds, manufacturing and consumer products.

Ford hopes to wheel around initial privatization contract

Photo: Laurentiu Obae

Nearly USD 1 billion has been officially invested by American companies locally since 1990, with the actual amount probably higher as many US firms invest in Romania through their Europe-based subsidiaries. And more could well follow, despite the lack of transparency and predictability among the issues deterring companies across the Pond, said the US Ambassador to Romania, Mark Gitenstein, last week. ∫ SIMONA BAZAVAN “If you wonder (…) why I speak out on law enforcement or the rule of law and anticorruption, it is because the first questions that any American company or investor asks of me are ‘Will I be treated fairly in Romania?’, ‘Will the rule of law apply?’, ‘Is it transparent?’ and finally “Are decisions predictable as they are in the US or as they are in Slovenia or Germany or the Czech Republic?’,” said Mark Gitenstein, US Ambassador to Romania last week, adding that if these problems were solved there would be more investments in Romania.

“Why? Because this is a great environment in which to invest. You have low labor costs, a very talented labor pool and very smart people. And you have a largely untapped equity market. So the po-

tential for expansion is tremendous if you can resolve these transparency issues. I know it can be annoying but I am going to continue to say this until I leave here,” the ambassador added.

Asked what can be done to increase US direct investments to Romania, Gitenstein said that the decision to invest in Romania lies entirely with American companies. “It is a private decision. And the most important thing to understand is capital is fungible, it can move anywhere in the world. And in the US in particular it goes where the greatest return is available for the capital. So when a big investor in the US is trying to decide where to put their money, it can just as easily go to Slovenia or Bulgaria or the Czech Republic or Hungary, as it could to Romania. I can do nothing to influence that decision other than encourage Romania to create

For about ten months Ford has been negotiating an addendum to its initial privatization contract for Automobile Craiova with no clear deadline being announced so far, either by the American investor or the local authorities.

Ford signed the deal to buy a 72.4 percent stake in Romanian state-owned auto assembly plant Automobile Craiova for EUR 57 million in fall 2007.

The car manufacturer has failed however to meet all the terms in the initial contract. If Ford does not produce 250,000 units locally by the end of this year, it risks a EUR 14 million fine according to Mediafax newswire. In the first quarter production amounted to about 3,000 cars, four times more than the same period of 2010 but still not enough to meet the contractual target.

Ford has invested about EUR 350 million so far at Craiova, according to some reports, whereas, back in 2008 company representatives said investments would amount to EUR 675 million by 2012.

Americans get wired into local IT industry Nowhere else is the US presence more notable than in the local IT industry. Many major American IT players are active in Romania, some of them having come as early as the 1990s. 2010 and the first months of 2011, even more so, have been busy with announcements of new developments.

In November last year Google established its official presence in Romania by opening an office with a local team headed by Dan Bulucea, formerly business and marketing director of Microsoft Romania."Romania is a very interesting country for Google where we can see opportunities on both sides – consumer as well as business" said Bulucea at the time.

The Bucharest office is responsible for developing Google's presence and strategy in Romania, establishing business relationships with Romanian partners, educating local companies about the benefits of going online and direct advertising sales.

Up to that moment Google had been present in Romania with its consumer products for Romanian users including first of all Google.ro Search as well as Google Maps, Google Places, Google Apps, Google Translate, and many others. The firm’s competition has also been busy.

Since this March Yahoo! has been avail-

able in Romanian, supplying news and weather information. Local users can also now create an e-mail account with the .ro extension.

Meanwhile in November last year, Intel Romania’s software development center was opened following an investment of several million euros. The facility employs around 25 specialists in software R&D, but the number will increase three or even fourfold as the projects diversify, company representatives have announced.

The center will develop software solutions intended to improve customer experience on a large range of smart devices on Intel architecture such as smartphones, TV sets and infotainment systems in cars.

Renée James, senior vice-president and general manager, Intel Software and Services Group, said at the time that Romania was a good location for developing software, due to a prolific university environment. Other companies that have opened R&D or technical support centers in Romania are Microsoft, Oracle, HP, and IBM. In April city officials from Targu Mures announced that IBM was planning to set up a local research center there. An agreement was signed between the American giant, represented by Thomas Revees, vice-president global of IBM Research, and Dorin Florea, mayor of Targu Mures, in the presence of PM Emil Boc. The Transylvania Center of Excellence in Research will conduct research in domains such as health, pharma, nanotechnology, life sciences and smart cities.

A working group comprising representatives of the administration and universities from Transylvania as well as in-

This is a great environment in which to invest.

You have low labor costs, a very talented labor pool and very smart people.

And you have a largely untapped equity market.

So the potential for expansion is tremendous if you can resolve these transparency issues.

US Ambassador Mark Gitenstein ternational IBM Research specialists will analyze the various areas of competence and the investments necessary to open the Transylvania research center. When these aspects are completed, the next step is to found the center and a research agreement will be signed by the parties involved, which is estimated to take place this month. Once the contract is signed, IBM could contribute with know-how, expertise and patents but the center will employ researchers from Transylvanian universities, who will be trained in IBM research centers around the world.

American giants have history Last year McDonald’s Romania celebrated the 15th anniversary of the opening of its first outlet in the country in Piata

www.business-review.ro Business Review | June 6 - 12, 2011

US INVESTMENT 11

Agerpres

Af-Ford-able promises? The carmaker is short of the terms of its Craiova contract

Unirii. The US fast food giant also opened the first local McCafe in Bucharest following a EUR 200,000 investment in the same location.Since 1995, the company has launched 62 branches in Romania, employed more than 3,400 people and invested over RON 300 million in the development of its business. McDonald’s plans to open three new outlets in 2011 and remodel five existing ones. It expects a 5 percent turnover increase this year.

One of the biggest US investments last year was the opening of the Procter & Gamble (P&G) shampoo and conditioner plant in Urlati, Prahova county.

The plant, which required an outlay of over USD 100 million, is a greenfield investment which the company says is part of its strategy of sustainable development in Romania.P&G has further expansion plans for the Urlati unit. “We want to develop Urlati into a multi category site. We hope that in time we will produce more than shampoo and conditioner here and, of course, this will require further investments,” said Luc Viaene, GM of P&G Urlati.

Last year P&G also celebrated the 15th anniversary of its detergent and bleach plant in Timisoara. Over USD 50 million has been invested so far in the factory, which employs 300 people and exports 40 percent of the over 30 million liters of Fairy dishwashing detergent, 30 million liters of Ace bleaching detergent and 100,000 tons of Ariel, Bonux and Tide detergents it produces each year.

US investors get heavy Texan oil company Lufkin Industries announced in November 2010 that construction had been started at a 33-hectare facility in Ploiesti, after an investment of USD 126 million, EUR 28 million of which consisted of state aid from the local Romanian government.

This new facility will provide oil field manufacturing hubs to service the Eastern hemisphere, with a focus on Eastern, as well as Western Europe, Central Asia, the Black Sea region, Middle and even Far East, to which 80 percent of production will be directed, with 20 percent focusing on the Romanian market.

Lufkin Industries expects to achieve a USD 30 million turnover in its first year of production and then to gradually double it, reaching an estimated USD 70 million in the following two years. Future investment is also expected by the company in Romania, especially due to the large surface that the plant in Aricesti enjoys.The firm’s plant in Romania became functional in the fourth quarter of 2010 providing jobs for over 320 employees, mostly local and European workers, Jay Glick, CEO and president of Lufkin Romania, told Business Review last year. In the coming years, the employee base is expected to expand.

Among the local oil companies that Lufkin has contracts with is Petrom, mostly for service equipment.

simona.bazavan@business-review.ro

AMERICAN PRESENCE IN ROMANIA US corporate presence: USD 1 billion since 1990 US government presence: USD 1.1 billion since 1960 Number of US companies: 1,417 active companies registered in Romania in March 2011, with more than 30 percent direct American shareholding Turnover June 2010: EUR 887 million Turnover June 2009: EUR 892 million

Data from the US Embassy and ICAP

www.business-review.ro Business Review | June 6 - 12, 2011

12 CITY RESTAURANT REVIEW

Chez Marie Str Dionisie Lupu 48, (Icoanei Park) MICHAEL BARCLAY

Photo: Laurentiu Obae

Well, there really is an owner called Marie. I have known her for the past 15 years when she was the cook at the British Ambassador’s residence, and I ate her food there throughout the tenure of some four successive ambassadors. I always considered this lovely lady to be a competent cook, so I was not surprised when she opened her own restaurant.

But being a cook and a restaurateur are two very different things, requiring different and diverse skill sets. So, let us see how she has made out. She chose her location well, just off Magheru. It is a low built villa which formerly housed two failed restaurants. This was not surprising because they were both dumps. But she must have invested some large sums of money in converting the dump into a delightful, newly designed place. It is all dark wood, flanked by some contrasting bright wallpaper. It is cozy, large and comes fully equipped with the proverbial terrace.

The menu arrived, but thereafter the waiter did not! These were the worst waiting staff I have encountered all year.

At one point, I literally waved my napkin in the air, and shouted to get attention from a group of three waiters who were

Diplomatic tradition: owner Marie learned her trade cooking for UK Ambassadors huddled in a private conversation, all of whom were ignoring the customers. Okay, back to the menu.

It was pleasant and safe, offering familiar dishes, without falling into the trap of becoming a specifically Romanian restaurant. So from a selection of well thought out starters we ordered a 'Beef Carpaccio' at RON 32. This dish is accredited by the modern day marketers of Harry's Bar in Venice as being their creation of some 50 years ago. The damned liars. They are spreading a myth. These Venetian braggarts also claim that they invented the Bloody Mary. Oh, give me a break! I went there a few years ago to find it packed with gullible Americans who believed this nonsense, and who were all

looking for nonexistent mementos of Hemingway, and he hated the place just like I did!

So to make Carpaccio you take a big beef tenderloin and freeze it, so that when you cut it razor thin, you don’t break up the fibers. Good kitchens have a circular saw to do this, otherwise the chef has to beat it to razor thin proportions.

Anyway, although it came on a huge bed of ruccola, it failed because it had not thawed out properly and it was soaking wet. Wet, raw, ice cold meat – an unpleasant disaster!

Our second starter of fried beaded sticks of Mozzarella was just fine at a small cost of RON 14. At this point Blondie was moaning and bitching about her bad

choice of Carpaccio, and she wanted to save her day with something more adventurous. So she ordered a 'Beef Chez Marie, Tenderloin, rice, vegetables and a spicy sauce'. Another bad choice and she blew it again, for although all the ingredients were fine, she howled that the 'spicy sauce' was nothing of the sort and was just some manufactured junk-in-a-jar off a supermarket shelf. I tasted it and agreed with her.

But I did better with my 'roast duck leg, plus duck fillet, red cabbage with apple and green beans with garlic’. The vegetables were excellent, the roast duck leg was perfect – but the kitchen screwed up the dish with an additional duck fillet which had been beaten flat into submission and then unnecessarily fried.

We passed on Chinese Chicken Noodles, with 'Chinese Sauce' and Chicken Tikka with 'Tandoori Sauce' as I suspected that these dishes would also contain supermarket jars of sauce! We also passed on beef with pepper sauce, mushroom sauce and Gorgonzola sauce; which given their simplicity I am sure the House would have prepared correctly.

But to summarize, here you have a delightful, warm place, a great location, excellent prices with four pork grilled dishes priced at RON 20 each, 11 salads priced at an average of RON 9, nine chicken dishes priced around RON 24, 14 vegetable or potato side dishes priced around RON 10. So you can't complain... unless like me you expect perfection. You will not get it here. But you will get a memorable and low cost meal.

mab.media@dnt.ro

www.business-review.ro Business Review | June 6 - 12, 2011

INTERVIEW CITY 13

Classical goes nationwide

Quartz Media Production

With a mandate to perform on the only official Stradivarius violin in Romania until 2012, ALEXANDRU TOMESCU has made it his goal to bring classical music to every Romanian. The eccentric and innovative artist, who once managed to raise RON 350 during a 30-minute incognito performance in the Bucharest subway, spoke to BR about his current tour and his reasons for remaining in his home country.

∫ CORINA DUMITRESCU Why do you think that you were selected to be a temporary holder of a Stradivarius violin through the national contest in 2007?

The competition to win the chance of playing a Stradivarius was organized by the Ministry of Culture. The jury was the same one as for the George Enescu International Contest, made up of musicians from abroad.

For me, it was an extremely difficult contest, not just because of the scope of the program, but also due to the huge responsibility that I took on through it. I was very pleased to be unanimously declared the winner.

My promise to perform on a Stradivarius violin in front of as many Romanians as possible is a personal initiative, brought about through the annual series of Stradivarius Tours. This year, the concerts have enjoyed unprecedented success: the concert halls were too small to accommodate everyone and I have already had to play twice in several locations.

What motivates you to continue your career in Romania, at a time when so many talented young people choose to leave?

Without doubt, those who go abroad usually earn more money than they would in Romania, and enjoy a superior standard of living. To me, as an artist, it is much more important to receive spiritual than material satisfaction.

In how many locations has the Stradivarius been played and how many people have attended the concerts so far? Is it a costly tour?

The tour is taking place in 14 locations across Romania: Iasi, Onesti, Focsani, Bacau, Pitesti, Craiova, Timisoara, Bucharest, Cluj-Napoca, Sibiu, Medias, Dumbraveni, Targu Mures and Baia Mare. In Iasi, from the first concert, the hall was too small even with all the extra seats. I used my day off and I gave the audience in Iasi a second concert, with free entrance. The hall was full again!

In Timisoara, I had a record audience of over

1,200, and the tour goes on. In terms of expenses, all I can tell you is that this is the costliest tour that I have ever organized.

What future events are you planning?

In November 2012, the five years for which I received the Stradivarius violin will be up.

I intend to participate in the contest again because I have realized that I am only at the start of the journey and I have so much more to do. However, I will continue my project of promoting classical music, even without the Stradivarius violin. I have not only played on my Stradivarius, I also have a second violin called Transilvanius, built

by Luthier Silvian Rusu, exactly to the dimensions of the Stradivarius.

What made you begin the subway experiment in 2009? Would you also try it elsewhere?

The subway experiment was the first initiative of the Romanian Blind Association.

The money that I collected then – RON 350 in 30 minutes – was donated to the association. For me, it was a fantastic experience: I was no longer in the closed setting of a concert hall, but in a place where everyone had a lot more important things to do than to listen to classical music. Of course, I would try it elsewhere – I would be very curious to see if passers-by are as generous as Romanians.

How would you promote Romania abroad?

I think that abroad, we can be competitive firstly through art and culture. I will not forget the concert I gave in Brussels, at the Brussels Town Hall. I remember that the mayor kept asking organizers, “Are these artists truly Romanian? You are not fooling me?” He just could not believe it; it simply didn’t fit with the image he had of Romania.

His reaction brought both joy and sadness to me. There is a lot to do externally speaking. For every bad news item about Romania, a minimum of 40 to 50 positive events are necessary. So there is a lot to do!

corina.dumitrescu@business-review.ro

www.business-review.ro Business Review | June 6 - 12, 2011

14 IN TOUCH CULTURAL CALENDAR Concerts June 6 Piata Constitutiei Sting Symphonicity tour Sting will present symphonically re-orchestrated versions of some of his best known songs, both as a solo artist and as frontman of The Police.

June 16 Sala Palatului UB40’s Ali Campbell charity concert The lead singer of British reggae band UB40, Ali Campbell, will perform in Bucharest. Money raised from sales of his latest album on the concert day will support vulnerable young people.

Community events June 10, 11, 12 Arthur Verona Street, downtown Bucharest Street Delivery On its fifth year, the event aims to persuade the Romanian authorities to create a pathway for pedestrians on Arthur Verona Street that would eventually lead to a direct connection between Grădina Icoanei & Cişmigiu, a 12-minute walk. The event also takes place in Timisoara.

June 11 Unirii 1 subway station La grande journee Liszt The French Institute dedicates June 11 to Franz Liszt, on the occasion of the bicentennial of his birth. La grande journee Liszt will begin with a recital in the Unirii 1 subway station, given by pi-

BUSINESS AGENDA anist Nicolae N. Dumitru. Later on, the festivities will continue at the Romanian Athenaeum.

George Enescu Philharmonic June 11 Romanian Athenaeum, Sala Mare 17.00, 19.00 Franz Liszt performances Performers: Brigitte Engerer, Bernard Chamayou The festivities are part of the Franz Liszt Day mentioned above.

Photo exhibitions May 28 – June 24 Crowne Plaza, Foyer Magnolia An A to Z of Romania - Through the Lenses of Expat Women The fundraising event has reached its second edition. Organized by a group of amateur female photographers, the exhibition presents a new perspective on Romania. The 38 women all have distinctly different backgrounds and come from 20 different nations.

Cinema June 3 (premiere) Potiche Directed by: Francois Ozon Starring: Fabrice Luchini, Catherine Deneuve, Gerard Depardieu Synopsis: When her husband is taken hostage by his striking employees, a trophy wife (Deneuve) takes the reins of the family business and proves to be a remarkably effective leader.

On at: Hollywood Multiplex, Studio, Cinema City Sun Plaza, Cinema City Cotroceni

June 6 17:30 – 21:00 A.T. Kearney organizes the “Restarting the growth engine in Romania” event at Radisson Blu. By invitation only.

June 7 ∫EVENT Business Review organizes the third American Business Forum event at JW Marriott Grand Hotel.

For more info please visit www.business-review.ro/events.

12:00: A first tour of the Collosseum mall working site will take place in Chitila. By invitation only.

Mechel organizes an event to announce an investment at Ductil Steel in Otelul Rosu. By invitation only.

WHAT WE ARE WORKING ON Corina Dumitrescu Journalist is researching the local blogging and social media community. Romanian bloggers are competing against major local publications for readership and increasingly acknowledged as opinion leaders among their target audience. Brands are hiring them as product ambassadors and more and more of them are being recruited by companies as online communication aficionados. corina.dumitrescu@business-review.ro

June 8 ∫EVENT Business Review organizes the second ICAP Credit Risk Conference at Athenee Palace Hilton. More at www.business-review.ro/events.

June 14 ∫EVENT Business Review organizes the third Dutch Business Forum at Capital Plaza Hotel. For more info please visit www.business-review.ro/events.

June 21 ∫EVENT Business Review organizes the third Energy - Focus on Oil & Gas event at Ramada Plaza Bucharest. For more info please visit www.business-review.ro/events.

Simona Bazavan Journalist is preparing a piece on the Romanian spirits industry. Tax evasion on alcohol and alcoholic beverages amounted to about EUR 700-750 million in 2010, which constitutes more than 70 percent of the local market according to some reports.

On top of this, the general decrease in consumption over the last couple of years has meant many of the local spirit producers have seen their businesses shrinking or even going bust. simona.bazavan@business-review.ro

WHO’S NEWS Michael Kaiser has been appointed acquisitions director for non-food products at Metro Cash & Carry Romania. He is taking over from Laurentiu Petre who has been promoted. Kaiser joined Metro Group in 1998 and over the years has held various management positions working for the retailer in Germany, Ukraine and now Romania.

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 Rail Cargo Austria AG as CEO and development manager for Romania. Calin has 15 years of professional experience in the field of railway freight. He is a graduate of the Polytechnic University in Bucharest. Calin began his career in 1996 with the Romanian Railway Company (CFR).

Bogdan Ciobotaru

has joined Grampet Grup as vice-president. He has previously worked for

is the new head of financing for Central and Eastern Europe (CEE), the Middle East and Africa of Renaissance Capital.

He will work from Renaissance Capital’s offices in London and Moscow. Ciobotaru joins the company after 10 years at Morgan Stanley, most recently as executive

ISSN No. 1453 - 729X

FOUNDING EDITOR Bill Avery EDITOR-IN-CHIEF Simona Fodor SENIOR JOURNALIST Otilia Haraga JOURNALISTS Simona Bazavan, Corina Dumitrescu COPY EDITOR Debbie Stowe COLLABORATORS Anda Sebesi, Michael Barclay ART DIRECTOR Alexandru Oriean PHOTOGRAPHER Laurentiu Obae LAYOUT Beatrice Gheorghiu

Gratian Calin

director, global capital markets.

Valentin Tuca has been apppointed CEO for insurance broker Aon Romania. He replaces Karina Rosut. Tuca joins Aon after more than 15 years in the brokerage industry in Romania. He first worked for an insurance broker for more than 10 years, setting up its operation in Romania. Since then he has worked for an insurer and has started his own risk management and strategic development company.

of its supervisory board last week. In addition, Martin Stenitzer has been appointed VP, Dragos Marius Calin will be responsible for sales and Daniela Meghea for life insurance activities.

Alexandru Vasilache

has been officially confirmed as the new president of Asirom following a meeting

has been prompted to senior associate with the criminal law department of Serban, Mares & Asociatii law firm.

He graduated from the Faculty of Law at Nicolae Titulescu in 2005. The same year he joined the Bucharest Bar. Vasilache has five years of experience as a pleading lawyer specialized in criminal law. His expertise covers economic, organized and traffic crime.

PUBLISHER Anca Ionita EXECUTIVE DIRECTOR George Moise SALES & EVENTS DIRECTOR Oana Molodoi MARKETING MANAGER Adina Milea SALES & EVENTS Ana-Maria Nedelcu, Claudia Munteanu RESEARCH & SUBSCRIPTION Lili Voineag PRODUCTION Dan Mitroi DISTRIBUTION Eugen Musat

ADDRESS No. 10 Italiana St., 2nd floor, ap. 3 Bucharest, Romania LANDLINE Editorial: 031.040.09.32 Office: 031.040.09.31 Fax: 031.040.09.34 EMAILS Editorial: editorial@business-review.ro Sales: sales@business-review.ro Events: events@business-review.ro

Mariana Diaconescu