Business Review No. 39, November 7 - 13

INTERVIEW: Francisc Peli, partner of PeliFilip, says a focus on client reten-

FRENCH INVESTMENT

tion is crucial for the future development of the law firm he manages, in a volatile economic climate »page 10

ROMANIA’S PREMIERE BUSINESS WEEKLY

FRENCH SMES ARE SHOWING GREATER INTEREST IN ROMANIAN AGRICULTURE, AGRI-BUSINESS, RENEWABLE ENERGY AND INFORMATICS »PAGE 14

November 7 - 13, 2011 / VOLUME 16, NUMBER 39

NEWS

High-level players Silviu Stroie, GM of Computer Games, says there are around 20,000 performance gamers in Romania » page 3 ENTREPRENEUR

Health check Horia Cardos, owner of farm product company Agroland, says food safety is one of his main concerns » page 6 PROPERTY

Realty 2011 Realtors came together to analyze Romania’s changing property market » page 8-9 PLUS Our food critic has eatery Lolly Pop licked » page 17 Spielberg’s Tintin: rusty rubbish or copper-bottomed hit? » page 18

TALKING TELECOM Photo: Laurentiu Obae

The difficulty of getting internet to rural areas and the low tariffs on the local market were two challenges debated at BR’s Focus on Telecom event, attended by IT leaders including Inaki Berroeta, CEO of Vodafone (left) and Jean-Francois Fallacher, CEO of Orange Romania »page 12-13

www.business-review.ro Business Review | November 7 - 13, 2011

NEWS 3

NEWS in brief

3Q Silviu Stroie

LOGISTICS Ekol Logistics enters local market with EUR 10 million investment plans for next five years Courtesy of Computer Games

GM Computer Games and president of the Professional Gamers League In what state is the e-gaming industry in Romania?

The Romanian e-gaming industry is estimated at EUR 20 million this year. Out of the 7 million people using the internet, about 2 million are active game players and 100,000 are hardcore gamers. Moreover, Romania is a fast growing gaming market due to its high-speed internet access through broadband connection and its PC-based profile: 90 percent of the market is made up of PC games, while consoles amount to 10 percent.

The local gaming industry is still underdeveloped because of piracy: some 90 percent of PC games are acquired illegally.

The amount of money invested in gaming competitions to be held in Romania in 2011 reaches EUR 110,000.

Romania is one of two countries in Europe, along with Germany, to have a national championship throughout the year.

What electronic games do Romanians prefer?

Romanians are avid players of DOTA and Counter Strike. There are about 500,000 gamers for each title. As far as sales are concerned, Counter Strike is by far the most popular. Computer Games has sold 30,000 copies this year alone. It is all the more impressive as Counter Strike has been on the market for over ten years.

How many performance gamers are there in the local gaming community?

In Romania there are about 20,000 performance gamers. The majority are aged 17-24, students living with their families. Men are the most passionate about PC games; few women are interested.

Top game players can boost their income by entering international or national electronic sports competitions, such as DreamHack Winter. The national and regional qualifiers – DreamHack Balkan – will take place in Constanta, at Forte Games, on November 5 and 6.

The prizes for the finals – DreamHack Winter 2011, to be held in Sweden from November 24-27 – amount to EUR 60,000. otilia.haraga@business-review.ro

Turkish integrated logistics services provider Ekol has entered the Romanian market by acquiring local company Omega Ro as part of its European expansion. Omega Ro had a EUR 2 million turnover last year, and Ekol hopes to raise the new firm’s turnover by 70 percent in the next two years. It also plans to invest EUR 10 million in Romania over the next five years.

Locally, Ekol owns a 6,000-sqm warehouse, and provides warehousing, collecting, packaging and complete distribution services. In Turkey the company owns over 400,000 sqm of warehousing space and a fleet of over 1,900 cars. Last year it posted a global turnover of EUR 160 million.

LEASING LeasePlan posts EUR 1.4 million profit in Q3 LeasePlan Romania, an operational leasing company, registered a profit of EUR 1.43 million at the end of the third semester, while its turnover also increased 33 percent to EUR 22 million versus the same period of 2010. The firm’s administered portfolio has risen by 45 percent to EUR 50.3 million. At end-September the company managed 6,000 vehicles, over 83 percent through the full operational leasing system, while the fleet management system made up 16 percent of the portfolio, and financing the remaining 1 percent.

FINANCING Norway to allocate over EUR 305 million to local projects in 2009-2014 Norway will make available over EUR 305 million for Romanian projects from 20092014, through Norway Grants and SEE (European Economic Area) Grants, sums advanced primarily by Norway (which makes a 97 percent financial contribution to the scheme) with input from Iceland and Lichtenstein.

Between 2009 and 2011 the total allocation through the two programs amounted to EUR 98.5 million – EUR 50.5 million though EEA Grants and EUR 48 million through Norway Grants. Sums were awarded to more than 65 individual projects and 117 NGO projects.

TELECOM Orange Care Center for mobile phones begins trading Orange Romania has launched its Orange Care Center for mobile phones, the first such outlet to be developed by a telecom operator in Romania and Europe.

The facility, located at 51-53 Lascar

Catargiu Boulevard, will be open until late and at the weekend. The investment in the site came to over EUR 60,000, according to Sorin Blideran, senior product manager at Orange Romania. The center does not only target the operator’s own customers, but all mobile phone users.

iPhone 4S arrives in Orange, Vodafone and Cosmote stores on November 11 Telecom operators Vodafone, Orange and Cosmote have announced the iPhone 4S handset will go on sale in their stores on November 11. The phone will be available in Hong Kong, South Korea and 13 other countries on the same day. The model is currently on sale in 29 countries and will be available in more than 70 by the end of the year. The cell phone comes in either black or white for a suggested retail price of USD 199 for the 16GB model, USD 299 for the 32GB version and USD 399 for the new 64GB phone.

POWER Rominserv Valves has USD 500,000 for 2011 investments Rominserv Valves Iaifo Zalau, a manufacturer of industrial fittings and safety valves, which is part of the Rompetrol Group, has invested USD 500,000 this year in optimizing productions fluxes and reducing resource consumption as well as improving environmental safety.

“The total value of investments made between 2006-2010 is approximately USD 3.5 million, while another USD 540,000 will be allocated to environmental investments,” said Ioan David, general director of the firm. Over 2006-2010 the company spent USD 900,0000 on environmental projects, one of which was closing its industrial waste deposit in Criseni, Salaj County. Rominserv Valves Iaifo Zalau registered a net turnover of USD 6 million at end-August, a 20 percent increase compared to the same period of 2010. The company estimates a turnover of USD 10 million at end-2011.

Adrem Invest puts EUR 45 mln into new Suceava cogeneration power plant Adrem Invest, a Romanian company specialized in industrial technical engineering, will start building a new cogeneration power plant in Suceava this winter. This statement was made by Adrian Bodea, president of Adrem Invest, in a press conference last week. He added that 20 percent of the financing for the project will be provided by Adrem Invest, while the remaining 80 percent will be borrowed from a consortium of two banks.

The biomass material will be obtained from local forest exploitation facilities.

Suceava produces around 1 million tons of biomass yearly, mainly from forestry activities. The newly built plant will have an 85 percent efficiency rate and will serve 25,000 apartments connected to the central heating system, along with private homes, companies and state institutions, which together host 60,000 Suceava inhabitants.

EUROPEAN UNION Romania keeps 2015 Eurozone entry target Romania will maintain its target of joining the euro by 2015 provided that reforms and domestic macroeconomic policies are implemented. This was the main conclusion drawn by the inter-ministerial committee which met last week. However, the country’s adoption of the common currency is contingent on economic developments at European and global level. The committee discussed the progress towards fulfilling the nominal convergence criteria in the context of recent economic developments in the euro area and the recently approved expansion of the European Financial Stability Facility. Inter-ministerial committee meetings are attended by the Prime Minister, ministers of the Romanian government, the governor and board members of the Central Bank and leaders of trade unions.

RETAIL Olympus opens EUR 55 million dairy factory in Brasov Greek dairy producer Olympus has officially opened its first local greenfield factory in Halchiu, Brasov county, following an investment of over EUR 55 million from the company’s own funds. At full capacity the factory can process 40,000 liters of milk per hour and produce up to 120 tons of yogurt, 100 tons of white cheese and 16,000 liters of PET milk per day. The Greek producer has been present in Romania since 1999 when it bought a dairy factory in Baraolt, Covasna county, which, following the opening of the new unit, has been closed. The company also owns a 23 percent stake in local dairy firm Prodlacta.

WEEK in numbers

6 percent is the new monetary policy rate as set by the Central Bank

130 million euros is the value of local pharmaceutical exports, according to the Romanian Association of Generic Pharmaceuticals Producers (APMG)

www.business-review.ro Business Review | November 7 - 13, 2011

4 NEWS TELECOM

RETAIL

Store refurbishment key to Carrefour takes on local potato Vodafone’s customer strategy producer as direct supplier Over the past few weeks, Vodafone has made free data available in the subway for its customers, launched its own MyVodafone application for the Apple and Android platforms and celebrated five years since opening its call center in Ploiesti. Inaki Berroeta, CEO of Vodafone Romania, tells BR one of the key customer-oriented programs will be store refurbishment. lot of customers inside our stores is that many people in Romania still prefer to pay in cash.

Photo: Laurentiu Obae

∫ OTILIA HARAGA How many call centers does Vodafone have in Romania at the moment?

Recently we celebrated the fifth anniversary of our call center in Ploiesti. We initially had most of our call centers in Bucharest and we thought it was a good opportunity to get closer to universities and tap into more resources. We also have a call center in Brasov and another one in Bucharest. The call centers in Ploiesti and Bucharest are similar in size while the one in Brasov is a little bit smaller.

We also employ other companies that provide call center services for us. So we cater to our clients partly through employees, partly through third parties. I cannot give you the name of the companies; all I can say is that we are working with three different firms. Two of them are in Transylvania and the other one is in Bucharest.

Our call centers cater only for customers in Romania. Our local network operations center also provides services to Italy, Greece and some other south European countries, checking the good performance of the network.

What are Vodafone customers unhappy about?

One thing that they would like is to queue less in the stores and for this reason we are working hard to facilitate flow there. One of the reasons we have a

How do you use the online channel to stimulate sales?

Our online channel today is not so much a sales platform but more of a customer care channel. We let customers check their bill, look at the cost, modify price plans. We are doing a little bit of sales, which are still small but will grow. There are other countries in Europe where online is already a significant channel, but not yet in Romania. The Netherlands is the benchmark; there online is already one of the top channels.

We reached 1 million accounts on MyVodafone in Romania and the number of electronic invoices has reached 500,000. We also have a MyVodafone application for Apple and Android platforms.

Telecom operators have been among the top spenders in print media advertising in H1, 2011. Where does Vodafone stand in all this?

Telecom operators are the biggest spenders in media on this market mostly because the telecom business is highly competitive. We have been pronounced the number 1 brand in Romania (ed. note: number 1 in Top Social Brands 2011). You are an admired brand not only because you spend money on communication – and I can tell you that we are not one of the top three spenders in Romania.

In Romania, our competitors spend more money on communication. But brand is not just about communication, it is also about how good you are at delivering the service. In terms of the split of our brand advertising, in Romania the advertising budget is heavily oriented towards television, in line with the specifics of the market.

otilia.haraga@business-review.ro

Courtesy of Carrefour

Your competitors – Orange, Cosmote, Romtelecom and UPC - have already revamped their stores. Will you follow suit?

We do have a program to revamp our stores. We have actually started to do that and soon we will unveil the first branch, which is going to be completed by the end of this month. It’s not just one, there are a few of them, but one of them will be in Bucharest. We are going to spend between EUR 5 and 10 million on the refurbishment of the stores.

No small potatoes: Agrico-M will supply a fifth of Carrefour’s spuds

A

bout 20 percent – or roughly 2,000 tons – of the potatoes that will be sold this year in the local Carrefour chain will come from Romanian producer Agrico-M, as the French retailer has signed a supply contract with the local company the Carrefour Quality Lines program. The retailer says it intends to boost the share in the coming years.

Through the Quality Lines program the retailer signs direct partnerships with local producers, eliminating intermediaries. The retailer says that this gives it control over the quality of the products and the certainty of constant supplies. The products are later sold in the Carrefour chain under the company and program logo. The contract with Agrico-M is not exclusive and Carrefour representatives are looking into signing agreements with other producers for the scheme. The company also has plans to launch new Carrefour Quality Lines for onion, apples and Romanian carp.

The selection process is however difficult, said Alina Horgea, fresh products ac-

quisition manager at Carrefour Romania, as not many local producers can meet all the contractual specifications that cover the entire production and storage processes. Before signing the contract with Agrico-M, Carrefour had to import potatoes, as it says no local producers could deliver the product it required – washed potatoes in 2.5 kg bags.

“The contract with Agrico-M would not have been possible if our partner hadn’t invested in the technology needed to meet the required conditions,” said Horgea. The last such investment that Agrico-M had to make was in a EUR 160,000 washing and packaging machine.

Agrico-M is a family-owned and run company in Targu Secuiesc, Covasna, a region with a tradition in the production of potatoes. The firm estimates that this year it will have a potato production of about 4,000 tons, roughly half of which will go to Carrefour. The rest will be sold through intermediaries or as seed material, said Mihail Mucsi, the company’s owner.

Over the past few years the producer has reinvested much of its profit and has even managed to secure EU funds. AgricoM has invested some EUR 1.3 million in equipment and storage capacity in the past five years. Mucsi says that besides all these investments, growing potatoes is an expensive business. Whereas a hectare of land costs RON 12,000 in Covasna, the seeds have to be imported and end up costing RON 10,000 for the same hectare. Carrefour has developed over 650 Quality Lines with more than 25,000 producers worldwide.

In Romania, the first such scheme was signed three years ago with Marex, a Romanian pork producer. Presently about 40 percent of the pork meat sold by Carrefour Romania comes from this producer. Another two programs were launched last year for trout and carrots with Romavet and Big Land Company respectively. Sales under the Quality Lines program amount to 25 percent for carrots and 15 percent for trout out of total product sales. ∫ Simona Bazavan

PHARMA

Pharmaceutical market ‘to post 10% annual growth through to 2015’

T

he local pharmaceuticals market will register an average yearly increase of 10 percent through to 2015, Radu Rasinar, president of drug firm AstraZeneca Romania, predicts. By the end of this year, the sector is tipped to reach between USD 2.5 billion and 3 billion. Rasinar said that AstraZeneca holds a 5 percent market share, estimated at USD 150 million.

On the short term, the consumption of pharmaceuticals is expected to increase as Romania is lagging behind in the main areas of medicine. The AstraZeneca president puts the yearly consumption of pharmaceuticals per head in Romania at around EUR 70, half the average rates across the region.

AstraZeneca will pursue additional investments in Romania, as the market has potential, but the business environment as a whole needs improvement. He believes that legal changes that impact the industry are made too abruptly. He said that amendments to the way drugs are funded on national treatment schemes were approved in September, while industry players were only informed in August. Rasinar believes that the medicine sector as a whole, including patients and doctors, would benefit if prospective legal changes were announced six months in advance. ∫ Ovidiu Posirca Read an extended version of this article on www.business-review.ro

www.business-review.ro Business Review | November 7 - 13, 2011

6 ENTREPRENEUR BUSINESS AGENDA November 8 09:00 ∫EVENT Business Review organizes the third French Business Forum at Crowne Plaza Hotel. By invitation only. Details at www.business-review.ro/events/ 12:00 McDonald’s Romania organizes a press conference to mark the launch of a CSR initiative at the Ronald McDonald House in Bucharest. By invitation only.

Agroland reaps the profits from supplying farms Horia Cardos, the owner of Agroland, had the courage to start a business on a market where the competition is unstructured: farm products. And his company is predicted to post a turnover of about EUR 10 million this year.

COMPANY PROFILE Agroland

13:45 The Romanian-German Chamber of Commerce and Industry organizes the conference Cluster Building in Romania, focusing on innovation and competitiveness, at Intercontinental Hotel. By invitation only.

2010 estimated turnover: EUR 7.5 million 2011 estimated turnover: over EUR 10 million Number of employees: 45 Initial investment: Deutsche Mark 20,000 Total investment: over EUR 1 million Number of partners: over 200

November 8-9 11:00 Deutsche Lufthansa AG will organize a press conference to present its global financial results and to announce future routes. Ofer Kisck, general manager for CEE of Lufthansa Group, will attend. By invitation only.

November 9-10 The How to Web conference, gathering 750 internet specialists and 30 international speakers, will be organized at Crystal Palace Ballrooms. The event will include 24 presentations & panels along with 12 workshops. By invitation only.

November 9-11 The Renewable energy exposition (RENEXPO) South-East Europe, which gathers exhibitors and experts in the green energy sector, will be organized at the Sala Palatului Cultural Center. Entrance fees will be charged.

November 21 Flextronics organizes a press conference to mark the launch of a new medical unit at the Flextronics headquarters in Timisoara. Bill Flaherty, Senior VP Flextronics Medical, will attend. By invitation only.

November 22 The fifth NetCamp, an event dedicated to online entrepreneurs and web developers, will be organized at Crowne Plaza Hotel. By invitation only.

Courtesy of Agroland

The Proforest Association co-organizes an international seminar on forests that will reunite over 100 specialists from 8 countries, debating the future of forestry and the environment in Romania, at the Romsilva headquarters. By invitation only.

stores,” says the entrepreneur.

At present the company has six categories of products: animal fodder, one-dayHoria Cardos embarked on his entrepreold chicken, seeds, products for the garden, neurial path back in 1993 when he and an feeding and watering accessories and pet associate decided to set up an ice cream disfood. “We operate now in two directions, tribution firm. The company thrived, imaiming to develop our territorial network porting ice cream from Hungary and disand to consolidate the sales of the existing tributing it in Timis County. In Timisoara stores,” says the Agroland owner. alone it distributed its products through a The idea to set up his own business network of about 50 stores. But despite the came as a natural step in his professional success the firm enjoyed, Cardos decided and personal development, as he had long to exit three years later after seeing the opwanted to become an entrepreneur. “I portunity to develop his current business, have always been attracted by the idea of which is specialized in the import and being an entrepreneur because I wanted to distribution of products for farms. build something. I was born in town and I Initially he started the firm with a parthave lived all my life there but I appreciate ner whom he bought out one year later. “In the healthy lifestyle from our grandparents’ 1996 I began to import veterinary products stories,” says Cardos. He adds that starting from Italy and a year later I was importing his own enterprise has been an opportunity, fodder for animals both through stores and as there was no market for such products distributors. First I decided to approach and the competition was unstructured. middle-sized and large farm owners and lat- “Even now there are no competitors that er we chose to develop our business tarhave more than ten stores. I am proud that geting small ones throughout our own I have managed to develop such a network stores where possible,” says Cardos. and I can help people to buy healthy food He adds that after 2002 the company exas an alternative to the industrial products panded its activity in other counties and that are available on the market now,” adds now has its own network of 15 stores. the entrepreneur.

“In 2004 we started to develop the franchise Looking back over the development of system and we are now active through the business, Cardos says that the most difover 50 partners that operate about 135 ficult moment was back in 2008 when he

∫ ANDA SEBESI

had a serious car accident. “I saw how many things depended on me and I realized that I needed to reshape my business so that short- and medium-term activities didn’t have to be reliant on my presence.” If he started another company the Agroland owner says that he would pay more attention to the collaborators.

The recession has not hurt his firm.

“The current economic crisis has been the right moment for us to extend our activity, as it is one of the few domains that have grown during this downturn. Actually we doubled our turnover during these years,” says Cardos. He adds that according to his company’s estimation, Agroland has a market share on sectors where it is active of between 20 and 70 percent.

But the main challenge that such a business faces is its acute seasonality. “You need many resources in a limited time.

Very big sales are made in a very short time,” explains the owner. He adds that after his business gained significant awareness on the market, its biggest challenge was logistical – to transport the commodities rapidly where they was needed. “We distribute through our own stores and a fivecar fleet, but we also work with different transportation companies. I am guided by the principle that it is more efficient to outsource this service because of the seasonality of such a business,” says Cardos. He adds that his strategy was to stay away from the price battle, with the company charging mid-level prices for high quality.

Asked about his plans for his firm, Cardos has bold ideas. “We intend in the future to continue this trend so as many people as possible get access to a healthy lifestyle. The reasons are related to health and food safety, in the context of the international food crisis. I am concerned about this problem and I have studied the changes made in Western Europe where people are concerned about food safety regardless of their social status,” says the entrepreneur.

He adds that the company will start an investment in a new warehouse in 2012 to achieve a total surface area of about 5,000 sqm within eighteen months. ∫

www.business-review.ro Business Review | November 7 - 13, 2011

NEWS 7

BANKING

National Bank of Romania proposes bridge bank option

T

Photo: Laurentiu Obae

Agerpres

he board of the Central Bank of Romania (BNR) has drafted an ordinance to set up a bridge bank, which could take over the administration of a bank that is in distress due to a sluggish economy or liquidity crisis. The bridge bank would ensure the continuity of the lender’s operations and address the credit institution’s core problems before marketing and selling it.

The draft emergency ordinance stipulates that the Bank Deposit Guarantee Fund (BDGF) be appointed as a delegated administrator and shareholder of distressed credit institutions, by increasing the institution’s share capital and buying the new shares issued by the BDGF. The draft adds that the assets and liabilities of a distressed credit institution could be partially or totally transferred to one or more eligible institutions. The transfer of assets and liabilities to a bridge bank does not remove the financial threat to the bank’s stability.

When the bridge bank is created, the BDGF is the sole shareholder and carries out the tasks of the supervisory committee. The bridge bank can operate for up to two years from the moment it is established and ensures the prudent continuous provision of banking services related to assets and liabilities taken over in view of its subsequent sale to an eligible third party purchaser.

The ECB (European Central Bank),

Adrian Vasilescu, advisor with BNR

Radu Gratian Ghetea, ARB president

which was also consulted by the Romanian legislator, says that the existence of a bridge bank could be extended from two years, if the financial risk is still present and no purchaser is found for the credit institutions. It added that deposit-guarantee funds should be propped up to pay claims made by depositors.

Adrian Vasilescu, advisor to the bank’s governor, Mugur Isarescu, explained last week that the bridge bank was a flexible institution that could become functional at key moments, offering a distressed

credit institution the chance to improve its situation or be sold to a third party. The amendments in the draft ordinance are part of Romania’s commitments under a stand-by arrangement with the IMF and World Bank.

Radu Gratian Ghetea, president of the Romanian Banking Association (ARB), commented that the setting-up of a bridge bank was a normal move, creating the necessary framework in the event that a bank needs support. Ghetea added that credit institutions in Romania have dealt in a rea-

sonable manner with the distortions of the current economic and financial crisis, proving the structural stability of the Romanian banking system.

“I believe that the Romanian banking system is well prepared for the scenario of persistent crisis effects and I am hoping the crisis vulnerabilities will be minimized,” said Ghetea.

The ARB president believes that mother banks will continue to allocate capital to Romanian subsidiaries, with post-crisis opportunities emerging in Romania in sight. Ghetea doesn’t exclude the possibility of a new Vienna agreement, through which nine banks committed to maintain their exposure in Romania.

The percentage of assets owned by foreign capital institutions of the total assets of the Romanian banking system was 85.4 percent at the end of June this year.

With more than 80 percent of the local banking system controlled by foreign lenders, Romania is particularly vulnerable to increasing banking sector uncertainties elsewhere in Europe. At end-September 2011, the country had 42 credit institutions, out of which nine were foreign bank branches, with total net assets of RON 344 billion. The NPL (non-performing) loans ratio was 14.2 percent, while the loan to deposit ratio reached nearly 119 percent. ∫ Ovidiu Posirca

www.business-review.ro Business Review | November 7 - 13, 2011

8 REALTY 2011

Realtors negotiate shifting sands of property market Confusion – this is the word on the lips of every developer, builder and participant in the 11th Romanian Real Estate Market Forum, Realty, organized by Business Review. No one could say with certainty what they expected from the future – maybe just more major change. ∫ ANDREEA CEASAR

Calculating the odds “What will put the Romanian real estate market back on the right track? Nothing, as there never was a market. After gaining access to the EU, our economy was absorbed by the good growth climate coming from the European direction and we pretended we had the right market. We had all the actors, such as generous banks, consultant companies and greedy developers,” said Alexandros Ignatiadis, a leading figure in the local Romanian construction firm Octagon Contracting & Engineering.

“Now the main players are gone and we have realized we do not have the mature market in which we liked to believe.”

This does not mean that developers and contractors are jobless, but they have to reexamine the market and its potential.

There will be opportunities, but the de-

All photos: Laurentiu Obae

Since the beginning of the year up to EUR 83 billion has been invested in Europe, of which just 11 percent went to Central and Eastern Europe, including Russia, a proportion which is similar to France’s investment percentage. Of the total, 70 percent ended up in Poland and Russia.

So where does Romania stand?

“In 2008 and 2009 Romania was completely off investors’ radar, but today this is no longer the case,” said Radu Boitan, managing director of the real estate consulting company Jones Lang LaSalle.

According to him, at the beginning of the year the firm started to close transactions due to the New Year feeling, but as time passed the fear of a new crisis returned and projects and plans are again being postponed.

Ofer Drori-Lieberson, CEO of the real estate development company Tagor Capital, shared these mixed feelings on the local opportunities and recovery signs.

“At the end of 2009 and during 2010 there was no interest in investing in Romania. Today we are seeing some signs of change, but it could just be wishful thinking as you have to have a little imagination to find them,” said Drori-Lieberson, adding that there are rumors that some small investment funds are planning to start new constructions. In two or three years the crisis may be gone, and a developer who was inspired enough to invest in a property before the others would have plenty to gain.

The presence of small investors was confirmed by Luciana Petrescu, project manager of the Romanian Real Estate Association.

“Some Arabian investors that have several millions of euro have asked me where they should invest, in what and when,” revealed Petrescu. The reality is that investors do not dislike Romania, but do not know what the winning real estate field will be.

Property experts at the BR event agreed that Romania’s real estate sector is still going through significant uncertainty Radu Boitan, director, Jones Lang LaSalle “In 2008 and 2009 Romania was completely off investors’ radar”

Costin Banu, managing partner, Real Estate Investment Consulting “Shouldn’t we start [...] increasing the capital of buyers and then try to develop other types of residential projects that fit the actual need?” mand will remain low and competition will grow stronger, he added.

At this moment, the most interesting markets are the retail and office sectors, according to Radu Lucianu, managing partner at Capital Property Advisors, while the logistic market is struggling to find the right mix of tenants to start projects. Office rents have dropped considerably, even in the most high-visibility projects in Victoria and Charles de Gaulle Squares.

“While three years ago rents were not negotiable for these areas, today we can

Radu Lucianu, managing partner, Capital Property Advisors (CPA)

Luciana Petrescu, project manager, Romanian Real Estate Association

“Owners are willing to sell their buildings, buyers are interested in buying for the right prices and tenants are willing to relocate”

“Some Arabian investors that have several millions of euro have asked me where they should invest, in what and when”

Daiana Voicu, managing partner, Willbrook international

Alexandros Ignatiadis, general manager, Octagon Contracting & Engineering

“Being green has helped us a lot during the leasing process”

Steven Borncamp, president, RoGBC “Today managers are calling us interested in obtaining green certificates and interested in general in what green means”

“Romanians love green as long as it costs the same as black”

Ofer Lieberson, chairman of the board, Tagor Capital ltd “Today we are seeing some signs of change, but it could just be wishful thinking as you have to have a little imagination to find them”

www.business-review.ro Business Review | November 7 - 13, 2011

REALTY 2011 9

and will continue to accept payment players, not giving a thought to the pospeak about EUR 16-18 per sqm for the tential customer. Now such flats are “under the table”. most desirable places, down from EUR empty and running up costs.

24-25 per sqm. Overall the market has be“We should stop waiting for signs of The cost of green come more flexible: owners are willing to stabilization from Europe and find the Building and buying green projects sell their buildings, buyers are interestpotential from our own backyard. The seems to be the latest trend, not only beed in buying for the right prices and days in which investment funds bought cause tenants are interested in cost-effitenants are willing to relocate,” added Luapartments are gone for a while, and this cient spaces, but also as some internacianu. tional groups will relocate only if the new There is still demand for office space, is not necessarily a bad thing because the domestic potential is great. You will sell space respects green corporate culture. as large companies are interested in reif your project meets the final buyer’s delocating to be closer to public transThe Willbrook Platinum office building is mand,” said Drori-Lieberson of Tagor portation after their current contract at present undergoing the procedure for Capital. ends.

Gold rated Green Building certification by The majority of empty projects were “Developers forgot that location is LEED (Leadership in Energy and Envibuilt to a completely obsolete design, ronmental Design) and is gaining clients the most important thing for a project. I not taking into consideration the average guarantee you that if an investor puts his thanks to this movement. “Being salaries of local buyers. money into such a project, they will regreen helped us a lot during the leasing “Romanians are still in the grey econturn,” stressed the Capital Property Adprocess. omy, with half or just a third of their visors representative. A well thought There are companies with a strong salaries on the books, and so cannot get out scheme with a good location, access corporate culture that are not allowed to credit. Until Romanian citizens make to public transportation and some price move to other office spaces unless they their employers pay their entire salary ofopportunities can lead to a best-selling are green certified,” said Voicu of Willficially, nothing can be done. The govproject. brook International, developer of the ernment should also change income tax, office building.

“Now is a great moment to start buildas this drives the employers to avoid deing, so that by the time economy starts “There is a Chinese curse that says: claring the full salaries,” added Andrew growing, you will have finishing the may you live interesting times. And toPrelea, CEO of residential developer project and be welcoming the new tenday I am starting to understand its` sayOzone Homes. ants,” argued Daiana Voicu, managing diing. If at the beginning of our association rector of Willbrook International, who “I believe the main problem rises bewe hardly could establish a meeting cause of the citizens` limited purchasing added that although there is still rentable with important developers and manbudget for acquiring residential products. agers were answering the phone during office space, it often lacks proper faciliSo, shouldn’t we start the other way ties. them, today managers are calling us inaround, that is increasing the capital of As for the residential market, opinion terested in obtaining green certificates buyers and then try to develop other type is split regarding its future, as unaffordand interested in general in what green able mistakes were made in the past. of residential projects that fit the actumeans,” says Steven Borncamp, foundal need?,” said Costin Banu, managing Investors and developers believed that if ing president & CEO of Romania Green partner of Real Estate Investment Conthey put their money into a plan, profits Building Council. sulting. were guaranteed. They merely changed But for many firms, building green But as employees are happy at the the name of the same overused business means too expensive architectural plan, moment simply to have a job, they accept plan and boasted that they were big construction process and building con-

struction materials.

“As we speak I am working on a project in Romania which should ultimately end up with Breeam (BRE Environmental Assessment Method) certification, and from my experience it costs more. In fact I am being paid more. What I can tell you is that Romanians love green as long as it costs the same as black,” said Ignatiadis of Octagon Contracting & Engineering. According to Capital Property Advisors’ Lucianu, building green costs 20 percent more, and should be developers’ choice as they have to invest in the project.

But the Willbrook International representative disagreed, and said that building green was not more expensive as long as you chose the right cost-effective design, building materials and so on. The various green certificates like Breeam, Leed and so on create confusion in the market, as each has its own set of rules and procedures which renders comparison difficult.

But the reality is that Romania, as a member of European Union, should start thinking about the EU’s set of laws that are trying to reduce pollution and increase green energy consumption. These laws will start to be applied in Romania, and will inevitably affect developers of new and old buildings. Furthermore, the trend could become a rule as many investors and tenants will look to buy and rent buildings classified as green, and might not accept other types of projects.

andreea.ceasar@business-review.ro

OCTAGON, specialists in deep foundation works, geotechnical and civil construction

restoration and consolidation works for historical and patrimony buildings.

OCTAGON is one of the most experienced specialists in geotechnical and deep foundation works, in Romania.

The company delivered the deepest foundation (50 m) in Romania, within the office building Sky Tower- Floreasca City Center (Blvd. FloreascaBucharest) and performed geotechnical and structural works within the tallest residential complex in Romania (80 m), Alia Residential (Str. A. Averescu- Bucharest).

Between 2005 and 2011OCTAGON delivered 87,000 sqm of diaphragm walls, 70,000 m of bored piles, poured 169,000 sqm of concrete in

park with new production and storage facilities and an office building which will be used by the park tenants.

In 2011 OCTAGON also expanded abroad. The company opened a branch in Bagdad, Irak and is looking at expansion opportunities in the North West of Africa.

In its six years of activity, OCTAGON was involved in the execution of private commercial projects and infrastructure projects in Romania, Bulgaria, Turkey and Greece.

Cathedral Plaza (Str. General Berthelot- Bucharest), Premium Plaza (Str. Dr. Felix- Bucharest) and Floreasca City Center- Sky Tower (Blvd.

Floreasca- Bucharest)are only a few of the large scale projects within which OCTAGON delivered construction works as specialized contractor and subcontractor.

ADVERTORIAL

OCTAGON CONTRACTING & ENGINEERING (www.octagon.com.ro ) is one of the main players on the geotechnical and civil construction market. The company was set up in 2005 and by 2011 it delivered 77 projects worth 61 million Euro.

OCTAGON provides civil engineering and general contracting works for office, residential and industrial developments, as well as turn key projects. OCTAGON also delivers complete services for special geotechnical projects and deep foundation works: diaphragm walls, slurry walls, bored piles, micropiles, grouting, anchors and sheet piles.

The company also executes

structure and excavated 100,000 sqm.

In 2010, OCTAGON was appointed geotechnical works contractor for one of the largest office buildings developed in Bucharest , on Blvd. Dimitrie Pompei, Hermes Business Campus. The works performed by OCTAGON included the construction of diaphragm walls, bored piles, top down excavation and execution of the foundation and of the 3rd and 4th underground levels.

OCTAGON delivered in 2010 structural works including casting of reinforced concrete for 42 buildings, raft foundation, reinforced concrete slabs, diaphragm and columns, installation of steel structure embedded in concrete bearings, architectural works, E/M works (electrical, sanitary, HVAC works) and landscaping works within the industrial project „Combined Cycle Power Plant 867 MW- OMV Petrom” (Brazi- Prahova county) and continued the construction of secondary roads and platforms, in 2011.

OCTAGON acquired this autumn the logistic base Comat Electro, a 2.5 million Euro investment , which includes 20,000 sqm of industrial facilities. The company will expand the industrial

www.business-review.ro Business Review | November 7 - 13, 2011

10 INTERVIEW

Gauging the wind of change on the legal scene Francisc Peli, partner at law firm PeliFilip, does not expect the real estate market to change significantly in the year to come and believes that banks are adopting a rather conservative stance on toxic real estate assets. However, the owners of retail centers are finally seeing consumption rates rise, despite a dramatic plummet in rents in the previous two years. ∫ OVIDIU POSIRCA What is the average value of real estate transactions this year and how do you see it going in 2012?

The market and the public were used to cataloguing as transactions investments in completed goods that are already producing revenue. Now the business focuses on opportunities and ongoing projects, meaning that investors bring value to these projects by building them, to create revenue and only then to sell them. The prices of large transactions range from EUR 10-30 million. Moreover, the real estate yield for projects ranges between 8 and 9 percent.

How are the owners of commercial retail centers coping with the falling prices of real estate and the current decrease in buyers’ purchasing power?

Between 2009 and 2010 we witnessed an adjustment in rents, allowing the survival of tenants and landlords. In 2009, owners had to decide between the future of the center and making immediate profit. In some cases, large tenants were given rent holidays of several months.

In 2011 owners are saying that things are not looking so dramatic, which had more or less been expected. We are at a point where the crisis is not that acute, although at a macroeconomic level in Europe and globally, the situation may worsen. Locally, consumption has leveled out. From my talks with owners, their business is starting to pick up again.

How are banks handling the toxic real estate assets on their balance sheets?

Banks realized that the solution for some

Photo: Laurentiu Obae

What type of transactions are taking place now in the real estate sector and how do you expect the market to evolve in 2012, in terms of new players and deals?

We are talking about transactions where developers or potential developers are finding land in new locations or purchasing projects in the initial stages of building – therefore, either land acquisitions or joint ventures for developing real estate projects.

The office stock in Bucharest will further develop, with the Barbu Vacarescu area being a hot spot at the moment.

Green technology in buildings is interesting for the competition between buildings, but not something that tenants and owners perceive can make a difference in value. Rent and location still make the difference. This could lead to a cost reduction but other aspects have to be taken into consideration like the management of the building, which is crucial for containing costs. Cost positioning involves both parties as owners discuss rent reductions with tenants. Apart from some investment funds that have some remaining money allocated to Romania, I am not convinced that new players will enter the local market or that new deals will be struck.

projects was insolvency, and I know situations where powerful investors have been invited to acquire the projects. In recent years, the market has been expecting a wave of price slashes but this will not come. The disposal of toxic assets will happen gradually over time, which in my opinion is a good decision, so we should not face break point in the coming period.

Will the recent adoption of the ordinance on the renewable law 220/2008 convince potential investors that Romania is the right destination for the production of green energy?

The main energy players that are interested in this law and its benefits had a reasonable expectation that the law would come into force. For them, it was something extra that had to come. Therefore, from this point of view it will mean the concretization of projects they were looking at and at the same time a safer approach to projects.

Although the law is still unclear in some areas, there are positive intentions and actions and we will see whether this enthusiasm proves to be well founded in the end.

Wind will be the driver of renewable projects, including critical mass. Solar power is looking good, but it is still in an early phase, but the medium term development is in wind. There is no significant

strategy or interest in hydro and the scheme for biomass is not well established yet, although there have been some attempts at these projects.

What PeliFilip practices have developed the most during the past year? Do you expect the situation to stay the same? Are you actively recruiting?

We are committed to adding good colleagues from other practices, and this is an area of growth, but our main focus is to hire bright young graduates. We have made a first wave of seven offers to next year’s graduates. We will continue to allocate time and resources to new talent and we are looking to grow organically. We have been positioned in such a manner that we offer assistance to legal firms that are not present in Romania like Linklaters and Norton Rose. At present we have 59 lawyers, excluding the new acquisition of graduates, and 9 partners.All the practices are performing well independent of one another, and this contributes to our growth, because it will prove tricky if you focus and recruit only for one or two practices on the medium term, not knowing the growth rate.We are involved in real estate, energy, corporate, competition, banking and employment – our traditional practices. Two years ago we added litigation, which is also a big practice for Romania.

CV Francisc Peli Previous experience: partner, NNDKP managing associate, head of real estate practice area, Linklaters Miculiti, Mihai & Asociatii SCA, partner, Iacob and Peli, Bucharest associate, Cobuz & Associates Education: law degree (Magna cum laudae), University of Bucharest, Faculty of Law What areas do you plan to focus on? Where will business development come from?

Clients that have been added to our portfolio are looking to solve day to day work issues and specific difficult situations. It is the portfolio settlement that is important, not striking the best couple of deals in the city. I once revealed that PeliFilip had improved its client base from 30 to 250 in three years but the figures are not important as they only show the scale of the phenomenon, proving that clients stick with our practice. Reputation is important in our business where one client recommends the firm to another. Our client retention rate is crucial for the growth of PeliFilip.

ovidiu.posirca@business-review.ro

www.business-review.ro Business Review | November 7 - 13, 2011

FOCUS 11

www.business-review.ro Business Review | November 7 - 13, 2011

12 TELECOM 2011

Broadband struggles on price-sensitive market In a country where 54 percent of the population does not have internet access and the government must meet its EU commitment to supply services to 3,648 areas without coverage, telecom operators need to make investments on a price-pressured market, with a very low average revenue per user (ARPU) while also keeping up with new technologies that can make small players big and big players small. Pundits who attended Business Review’s Focus on Telecom event shared their views on broadband infrastructure needs and how to capitalize on value-added services. ∫ OTILIA HARAGA ”In Romania, mobile internet has in a way compensated for the lack of fixed broadband infrastructure,” said Catalin Marinescu, president of the National Authority for Administration and Reglementation in Communications (ANCOM), adding that the penetration of copper cable in Romania is very low compared to other countries. Romania has seen 3 million fixed broadband connections and 6 million connections via mobile internet.

Raoul Ros, CEO of Alcatel Lucent East Europe & Romania, said that to deploy broadband infrastructure at a national scale requires great investments in terms of both time and money, which is why the state and private investors need to work together.

The European Union has a target for all member states to provide by 2020 full national coverage with internet connections faster than 30 Mbps, while half of all households should have an internet connection that is faster than 100 Mbps. “The cost of such a plan in France was estimated at EUR 25 billion over 15 years,” said Ros. He added that EU targets were set with fiber optic networks in mind. However, this is costly and not available everywhere. “You cannot reach a remote village or a few scattered houses in the mountains with fiber optics. The plan should include different technologies that are already deployed in the market,” he said.

However, Romania scores better on affordability, as the market with the lowest prices in the EU 27, said Jean-Francois Fallacher, CEO of Orange Romania. “The ARPU in this country is about EUR 6-7 EUR. In a country like France, the ARPU amounts to approximately EUR 30, so about five times more. If you compare the purchasing power of the two countries, you will see that telecom services here in Romania are more affordable,” added Fallacher.

In spite of the market specifics, prices for equipment are as high as everywhere else. ”It is one thing to sell a piece of equipment in France where the ARPU is over EUR 30, and quite another here where the ARPU is much lower, which means the business model needs to be different as well,” commented Babak Fouladi, CTO of Orange Romania. ”Telecom is a very capital intensive business. We don't have big factories to run, but Orange has in this country more than 4,000 antennas that we need to maintain, and these are very high investments that you make for at least 5-10 years,” said Fal-

Jean-François Fallacher, CEO, Orange Romania “If you look at the level of money invested to generate one EUR of revenue, it is high. This is the market with the lowest prices in the EU 27” Antonio Eram, founder & CEO, Netopia Sistem and mobilPay.com “At the moment most companies earn more from premium content than from advertising”

Catalin Marinescu, president, National Authority for Reglementation in Communications (ANCOM) “It's better to let the market set the level of the LTE license tax since Romania differs from other countries” Julien Ducarroz, chief commercial officer, business to consumer, Orange Romania “NFC will probably be a story like 3G, meaning you need a critical mass of handsets before you can envisage doing anything”

Sorin Manea, telecom division manager, Samsung Electronics Romania

Cristian Herghelegiu, business development & strategy director, ePayment

“We have in our portfolio NFC handsets and we will obviously bring these to Romania when our partners request it”

“Romanians are already paying for content. [] What we need is to allow people to acquire it via various payment means”

Dragos Chivu, data marketing director, Vodafone Romania

Catalin Cretu, country manager, Visa - Europe Romania

“Very many users would rather their smartphones could cook than have a long-standing battery”

“To reach 50 million users, the telephone needed a generation, the television needed a decade and Android needed several months”

lacher, calling for greater predictability from the regulating sector. Moreover, technology is constantly changing and evolving. “3G is not yet coming to its profitabil-

ity and LTE is already emerging,” he said.

The European Commission is looking at adopting the Radio Spectrum Policy Program next year, pushing for the transition

Inaki Berroeta, CEO, Vodafone Romania “Broadband adoption depends not only on the infrastructure quality but also on accessibility, and the penetration of PCs and similar devices is low” Raoul Ros, CEO, Alcatel Lucent East Europe & Romania “LTE is inevitable in Romania: even if people do not have a lot to pay for these services, they are expecting them”

Babak Fouladi, CTO of Vodafone Romania “The extension of mobile broadband is certainly a solution for areas where we cannot have fixed broadband”

Cristian Fota, national sales director of Radiocom “Our aim is to develop services based on Wimax technologies in areas with no internet network coverage”

from analogue to digital terrestrial TV so that some of the TV bandwidth will be used for new technologies like LTE, said Marinescu of ANCOM.

www.business-review.ro Business Review | November 7 - 13, 2011

TELECOM 2011 13

All photos: Laurentiu Obae

Coverage and cost are two of the challenges facing the local telecom scene, industry insiders told BR’s Focus on Telecom event “In Romania we are not very far along in the transition from analogue to digital TV,” he said, adding that ANCOM will organize an auction next year for the first LTE licenses in the frequencies of 800 Mhz and 2.6 GHz. ”We are in advanced discussions with the Ministry of Defense to release the 2.6 GHz band. We hope we will hold the auction by the end of next year, which means we will probably be able to have these new technologies operational in 2013,” he predicted.

In turn, operators also shared the experience they have had with LTE. ”Orange had a trial license from ANCOM at the be-

ginning of this year. We had four LTE antennas and we tried it, and it worked very well. We enjoyed wireless speeds of up to 100 Mbps,” said Fallacher.

Meanwhile, Vodafone has gone live with an LTE network in Germany. “We have seen the usage and how the limitation of some local loops can be addressed with LTE. We have a full IP network which is one of the requirements for LTE. Our investments in our backbone have been made with the anticipation of LTE spectrum availability,” said Fouladi.

Marinescu commented, “What I want to

underline is that new technologies usually face problems of trust.” This is why he does not expect LTE to be adopted by the customer very quickly. Since each country is different, Marinescu said the wisest choice would be to “let the market set the level of the LTE license tax.”

In conclusion, LTE will inevitably reach Romania too. “Even if people do not have a lot to pay for these services, they are expecting the services,” said Ros. Despite being a market where price pressure is high, Romania is also a very technologically driven country. Quoting a sur-

vey on how Romanians use their mobile phones, Dragos Chivu of Vodafone said 45 percent do so even before getting out of bed.

Surveys show that local users care less about how long the battery lasts and more about what they can do with the phone.

Romania is following a global trend. “In 10 years, we will go from 5 billion smartphones to 50 billion, while payments via mobile phone will exceed payments via banking cards,” predicted Catalin Cretu, country manager Visa Europe- Romania.

The question is how telecom players can capitalize on the market’s hunger for addedvalue services.

Using the Samsung experience in Romania, Sorin Manea, telecom division manager with the company, said that on Samsung Apps, the Bada operating system alone has seen 22,000 downloaded applications, of which 2,100 were paid and the rest were free of charge. Near-field communication (NFC) is another area that operators are investigating. ”We have in our portfolio NFC handsets and we will obviously bring these to Romania when our partners request this. In one form or another – I cannot go into further detail – this is already happening in Romania,” said Manea. ”With NFC, history will probably repeat itself as in the case of 3G, meaning you need a critical mass of handsets before you can envisage doing anything seriously.

You need to have the entire ecosystem in place,” said Julien Ducarroz, chief commercial officer, business to consumer division, Orange.

otilia.haraga@business-review.ro

Radiocom turns to WiMAX for Romania Radiocom broadband strategy is to cover Romania’s “white areas” communication affordable for the enduser. We are now able to supply a broadband access alternative in areas where similar technologies cannot enter the market. We are referring to the industrial areas and the surrounding areas of the county seats and a significant number of small and medium towns, urban areas where building access is difficult, low population density areas where similar alternatives are difficult to implement.

WiMAX services are offered to the customers under Easy2BiNet brand, a double-play solution, voice and Internet connectivity services, "best effort" or "premium" Internet, starting from 7 EURO / month/subscription (excluding VAT).

We are ready to face competition.

WiMAX makes the difference between success and failure of a new broadband access infrastructure, without cables, especially for the Romanian customers who are price sensitive.

WiMAX CPE’s (customer premises equipments) are “plug and play” and they can be installed by the end - user easily. Technician support for installation is free-of-charge.

The main advantages of this particular technology are flexibility, superior performance, low cost, compatibility with mobile Internet and the ability to provide all IP services.

Though RADIOCOM has the best national wireless coverage with WiMAX technology, we have brought only a first, fixed component of 4G technology. Nevertheless, in the near future, we intend to provide full mobility to our subscribers.

Recently, RADIOCOM has commercially launched WiMAX in five major cities in Romania: Constanţa, Oradea, Timişoara, Braşov and Iaşi. By using this high-tech, flexible and tailored to any need of communication, the selected cities for product launch have become indeed telecom centers.

For more than 70 years, RADIOCOM has been an active presence on the telecommunications market in Romania and, nowadays, the company is, undoubtedly, an ascending brand, 100% Romanian, with a history starting back in 1936, when the first radio broadcasting transmitter from Bod region was activated. Innovation is

surely our motto due to continuous investments in new technologies designed to suit market evolution and to offer competitive and complex telecommunications services by using the most complex radio infrastructure in Romania.

RADIOCOM, registered trademark of National Company of RadioCommunications S.A, is one of the main providers of networks and electronic communications services in Romania and, at the same time, leader on broadcasting market.

The company portfolio includes almost all the telecommunications operators in Romania now using RADIOCOM infrastructure and also large customers from important sectors of the national economy such as: banks, financial institutions, multinational companies, etc.

ADVERTORIAL

RADIOCOM is currently involved in a complex process of implementing a wirelesss t e c h n o l o g y, spread naCristian NIȚU – President tionwide, that General Director provides highspeed Internet connectivity based on WiMAX technology, a high performance wireless broadband network. WiMAX (Worldwide Interoperability for Microwave Access) allows wireless data transmission, offering high speed Internet access up to 24 Mbps without the need for cables.

Our company is targeting both customer segments, business and residential, thus focusing to cover the so called “white areas”, areas that lack technical solutions or that are less accessible to other means of transmission supplied by the existing telecom operators.

One of the mail goal of WiMAX technology is to make data and voice

www.business-review.ro Business Review | November 7 - 13, 2011

14 FRENCH INVESTMENT

C'est la vie: French investors march on en bloc The past year has been no vie en rose for French companies active in Romania, but despite the slowdown, investors from the Hexagon have kept their sangfroid. BR takes a look at the way some of the largest French investors in Romania have handled their business in the past year.

Dreamstime

Flagship investors: French firms are adjusting their strategies to fit the economic climate

∫ SIMONA BAZAVAN “Despite the crisis, French companies did not leave Romania in 2010 and have even continued to invest. This year we can mention new investors such as Axa Insurance and the opening of the first Leroy Merlin DIY store,” representatives of the French Romanian Chamber of Commerce (CCIFER) told BR. As for newcomers, CCIFER representatives say that there aren’t any big names in the pipeline as most of the large players are already here, but there is an increased interest coming from small and medium-sized French companies to invest in the Romanian agriculture and agri-food industry as well as renewable energy and informatics.

A recent barometer of the economic and business environment in Romania put together by the chamber indicates that overall French investors are optimistic about the future of their business here, although the socio-political context raises concerns.

“Being optimistic but realistic, I see a rather good future for French investments and physical presence on the Romanian market. I strongly believe that Romania meets so many criteria that plead for greater interest from our investors: cultural, human and geographical proximity, and qualified human resources are just a few of them,” Philippe Garcia, economic counselor and director of the Ubifrance economic mission to Bucharest, told BR. He stressed that while there are many potentially attractive fields to French investors, such as transport infrastructure, energy, health, financial services and IT, presently the Mission Economique Ubifrance of the French Embassy to Bucharest focuses on two priorities.

The first one is the automotive industry.“There are at this moment about 300 French OEMs (e.n. original equipment manufacturer) established in Romania, with the estimated potential for 50 more: we are working with the Ubifrance network,

the French automotive federations and clusters, plus chambers of commerce in France to bring those 50 OEMs to Romania in the next two years,” he revealed. The second short-term priority is to bring new French brands on the retail market in fields like fashion, delicatessen, hairdressing, department stores, automotive maintenance and car-wash stations, as consumption will eventually pick up.

7 bln

euros had been invested

by French companies in Romania by the end of 2009, making it the third largest source of foreign capital for Romania Romania is home to about 6,000 French capitalized companies, according to data from CCIFER. Half of these firms are active and reported a combined turnover of approximately EUR 13 billion and about 110,000 employees for last year. DaciaRenault, Michelin, Orange, BRD-Groupe Societe Generale, Auchan, Carrefour, GDF Suez, Veolia and Lafarge are at the forefront of French investments in Romania.

France is the third biggest source of foreign capital to Romania with over EUR 7 billion invested by the end of 2009.

Big guns in defensive mode In the first nine months of this year French carmaker Renault produced about 231,000 Dacias in Romania, down by three percent compared to the previous year. Of these, 207,000 were exported while local sales decreased by 20 percent in the first three quarters of this year. Global sales of Dacia cars declined by 2.3 percent in the first nine

months, with the Duster SUV being the only model that saw sales go up.

Last year the French carmaker invested EUR 166 million – of which about 25 percent was provided by the European Bank for Reconstruction and Development (EBRD) – in the Renault Technologie Roumanie (RTR) technical center in Titu.

Following this investment, Renault has everything in Romania from design and test centers, to the production of components, cars and sales centers for all three brands of the Renault-Nissan alliance.

Last September, Renault Romania also opened a new spare car parts center in Oarja, 20 km from Pitesti. According to representatives of the carmaker, the investment in equipment for the center is EUR 3.5 million, with the remaining sum the premises investment made with partners.

Moving from automotive to telecom, where the French also have a strong say in the market, Orange Romania’s revenues in the third quarter of the year totaled EUR 241 million, 3 percent up on the second quarter of the year. However, the company’s revenues decreased from Q3, 2010, when Orange posted revenues of EUR 246 million.

“In Europe, revenues were up 0.5 percent, after rising 0.3 percent in the second quarter. The trend in Romania saw a significant improvement, with the decline limited to 2.0 percent after a drop of 4.9 percent in the second quarter and 6.3 percent in the first quarter,” said France Telecom officials.On September 30, Orange had 10,184,000 clients, which also represents a slight 1 percent growth on the previous quarter of this year. The mobile broadband segment registered 4.3 million clients, having increased 43 percent from the second quarter.

Bankers try to stay steady In the past year banks have felt the pressure of both the challenging domestic market and international turmoil. French-held BRD posted a 23.3 percent decrease in profits, from RON 367 million in the first half of 2010, to RON 282 million in H1 2011.

Net banking income decreased by 9 percent from RON 1,750 million in H1 2010 to 1,600 million in H1 2011.

The number of active clients sank from 2.4 million in H1 2010, to 2.3 million. Loans to customers decreased by 3 percent in value, from RON 16,555 million in H1 2010 to RON 16,052 million. Customer deposits fell by 5 percent, from RON 14,404 million to RON 14,710 million.

French get energetic Energy, and especially green energy, is often cited as one of the most attractive industries for investors and the French are no exception. Schneider Electric is a French company specialized in the management of energy, with operations in over 100 countries, including Romania.

“We offer solutions for different market segments, occupying leading positions in the areas of energy and infrastructure, industrial processes and data and network centers. The company also has a prominent

presence in the domain of applications for the residential segment,” Saulo Spaolanse, president of Schneider Electric Romania, told BR in a recent interview.

The company says it has posted growth in 2011 and is investing in increasing its market share. “I emphasize that we always like to look at the long term. We have been established in Romania for 15 years, so Schneider has a serious commitment to investing in the Romanian economy,” added Spaolanse.

Retailers continue advance Not only have French retailers continued to expand their operations in the past year, but a new player, Leroy Merlin has entered the Romanian market. The French DIY retailer opened its first local store in the Colosseum retail park this September following an investment of approximately EUR 6 million. The outlet has a 15,000-sqm sales area. French retailer Carrefour opened in October its 24th hypermarket in Romania, also located in the Colosseum retail park in northern Bucharest. Carrefour Colosseum is the company’s eighth hypermarket in the capital and has a sales area of 8,400 sqm. Another hypermarket will be opened this month in Botosani. In addition to the hypermarkets, Carrefour presently operates 40 supermarkets in Romania.

Eight units have been opened so far this year and six more will follow by yearend.

However Carrefour did more than expand on its existing formats. This October it also opened its first local proximity store following a franchise agreement with local meat producer and retailer Angst under the name of Carrefour Express Angst. By the end of this year the franchise will be extended to other Angst stores and, by the end of 2012, all of the existing 24 Angst stores and the new ones that will be opened in the meantime will included in the scheme, said Sorin Minea, president of Angst.

Expansion is also in the cards for Auchan. The retailer intends to extend its hypermarket chain over the next couple of years by investing about EUR 150 million.

Another player, Romania Hypermarche, the company that operates the local Cora hypermarket chain, opened this October a new unit in the Galleria Arad shopping center. EUR 5 million went into what is the French retailer’s eighth local hypermarket.

Over the coming years the company has plans to considerably up its expansion pace. Between 20 and 25 new units will be opened in the next three to four years, announced Philippe Lejeune, general director of Cora Romania. In 2012, another three hypermarkets will open in Bucharest, Slobozia and Bacau. At the beginning of the year, the company announced plans to open its own shopping mall in Constanta under the name of Corall, following an investment of EUR 100 million. The shopping mall should open in the second half of 2012.

simona.bazavan@business-review.ro

www.business-review.ro Business Review | November 7 - 13, 2011

15

GRUIA DUFAUT, after 20 Years of Legal Practice What are the firm’s practice areas at present? Are you thinking of expanding into new areas?

We provide services ranging from Dana Gruia Dufaut, setting up of Managing Partner companies, assisting our clients in the development of their usual activities, representing them before court in various litigations, to assistance or representation for specific projects: corporate and public procurement, real estate, renewable energy projects, etc.

adapt ourselves in order to help them get through these difficult moments.

In order to be able to provide all these services and thus to meet our clients needs and expectations, we have developed in time several departments covering fields of activity such as corporate, social, tax and financial, real estate, competition and intellectual property law, as well as commercial, civil, administrative and tax disputes.

Also, taking into consideration the Government’s measures to counteract the effects of the economic crisis, it is well known that the number of the public administration employees decreased, which lead, among other things, to the late solving or to the rather unjustified rejection of the VAT refund applications ( VAT paid in Romania by taxable entities domiciled in the European Community). This is why this type of tax litigations has been predominant this year.

As regards expanding our practice to new areas, we do not really have a plan in this respect. What we want is to develop the already existing departments in order to meet our clients’ needs related to the market’s current situation – for example the litigation department or the labour law department, or the department dealing with the winding-up – reorganization of companies in difficulty.

What were the industries that saw the most activity and revenue within your practice?

It is rather difficult to generalize, especially given the current conditions which are surprising enough. Anyway it is clear that for real estates, although things seem to be improving, they are not yet generating important benefits. In addition, there are other industries which struggled and succeeded in keeping the same profitability level as in the previous years, but there are also others who unfortunately had to put an end to their activity. Beyond any shadow of a doubt most of the clients are much more careful and reserved in taking investment decisions.

Among our clients, those who had a significant activity in the last years and who succeeded in having similar profits as in the previous years are activating in the field of commercialization of staple supplies (food, library and printing materials, clothes, etc.), food or distribution industry, but also automobile industry.

When dealing with French investors,

GRUIA DUFAUT Law Office Headquarters in Bucharest

what would you say are the main issues they need assistance with in relation to their local investments?

Has this changed at all since you started your practice here?

First of all, a fact that has not changed ever since GRUIA DUFAUT Law Office’s presence in Romania, namely 20 years, is that French investors need legal assistance for their implementation in Romania, either for opening a subsidiary or a branch, or for taking over a Romanian company.

As a general rule, the legal assistance provided for the French investors has been in all the domains of the business law. We usually provide legal assistance for the drafting and negotiation of the agreements with the Romanian partners, but also consultancy in labour law in relation with the employees of the Romanian subsidiaries, fiscal opinions but also for certain punctual subjects of the Romanian legislation, claims recovery, but also assistance in projects regarding mergers and acquisitions.

What has changed in time is our area of expertise. At the beginning there was the privatisation, then we dealt with the real estate wave, while today the most frequent are the cases of corporate restructuring, claim recovery, but also acquisition, this being a proper period for those who have cash and are now buying companies in distress.

Moreover, our Law office is currently also expanding on the market share of Romanian companies with or without foreign capital, as our current expertise has been requested by many Romanian companies.

What changes in the treatment of foreign investors would you point as favorable to increased FDI to Romania?

Today foreign investors have the same rights and obligations as the Romanian ones, meaning that any favorable conditions for Romanian investors are also profitable for foreign investors.

Low taxes are always attractive, therefore a more relaxed fiscal environment should also be an advantage for the foreign investors. Still this advantage should be doubled by a better public administrative system and especially the tax administration, which should renounce its bureaucratic procedures by computerizing them and thus solving transparently and rapidly the taxpayers’ demands.

Considering that Romania has still a lot to catch up as regards performant technologies, it would be very good for the Romanian state to stimulate foreign investments in this area. Nevertheless, the development of any type of infrastructure (road, rail, water aqueducts, pipelines etc), for which EU funds are available, would definitely lead to a swift return to the Romania’s activity increase.

Tel : + 40(21)305.57.57.

Mail: bucarest@dgd-conseil.com

ADVERTORIAL

What were some of the prominent cases your practice advised on over the past year?

At the beginning of this year, we advised on a restructuring project consisting of several mergers within groups of companies, and then on real estate acquisitions involving both land and constructions.

Likewise, we dealt with many acquisitions of assets of bankrupt companies and we are currently working for a renewable energy project. In addition to the already mentioned projects, we also had to deal with staff reorganisation procedures at company level, as well as with collective and individual redundancies. The crisis affected our clients’ business and we had to

When talking about the litigation department, the predominant and most important cases concerned the area of public procurement dealing with major projects of road infrastructure, but also with litigations concerning the cancellation of building licences issued illegally, in breach of certain special protection areas established for protecting certain networks serving public services, or purely and solely the non-compliance of the regulation of Bucharest’s protected areas, as well as litigations for the recovery of claims.

Moreover, the staff restructuring procedures and collective and individual redundancies mentioned above naturally gave rise to related litigations.

www.business-review.ro Business Review | November 7 - 13, 2011

16 CITY JAZZ

Elevation Quartet play ArCub

Elevation Quartet: Abraham Burton, tenor sax; Lucian Ban, piano; Derrek Phillips, drums; and Brad Jones, bass Born out of the collaboration of American saxophone player Abraham Burton – “one of the greatest tenor saxophone players of our time”, according to Lincoln Center curator, Todd Barka – with jazz pianist Lucian Ban, Elevation Quartet’s “nujazz” sound is coming to Bucharest, as part of a series of concerts held in Paris, Vienna, Munchen, Rennes, Bad Ishl and Budapest.

Both Ban and Burton are active names on the New York jazz scene, where Tran-

sylvanian-born pianist Ban is considered one of the most important jazz musicians to emerge in the last decade, his music’s “fluency and sensibility” recalling Vladimir Horrowitz and McCoy Tyner, according to All About Jazz critic, Terrell Holmes.

Sunday Nov 13, 20:00, ArCub Hall, 14 Batiste St, tickets available at www.arcub.ro

CLASSIC

Leonskaja performs in aid of Minovici museums

Georgian-born pianist Elisabeth Leonskaja A household name on the international classical music scene, pianist Elisabeth Leonskaja will give a charity concert at the Athenaeum, as part of a fund-raising campaign to save the 106-year-old Mina Minovici Museum and the roof of Casa Minovici, which hosts the Western Art Museum Ing. Dumitru Furnica Minovici.

The museum’s contents, such as its collection of stained glass, engravings and

rare books, are in danger because the damaged roof requires urgent repairs.

Lenoskaja’s program includes Schubert’s sonatas no 19, 20 and 21.

The event is being organized by the Friends of the Minovici Museums Association.

Sunday, Nov 27, 19:00, the Athenaeum, tickets available at www.eventim.ro.

www.business-review.ro Business Review | November 7 - 13, 2011

CITY 17

RESTAURANT REVIEW

IT’S NOT SEXY Lolly Pop, 13 Decebal Blvd, tel 0724 948 820, www.lollypop.ro MICHAEL BARCLAY

Photo: Laurentiu Obae

For years I have espoused Decebal as one of the best eating areas in the capital. There are numerous restaurants lining this vast street, both expensive and low cost, with quality levels that fill the spectrum from average to relatively good. And there is Lolly Pop! Its very name has a connotation of under-aged sleaze about it, and this impression is not helped by its logo of a cartoon caricature of a scantily attired ‘lady’ sitting in a ludicrously provocative pose on a sofa.

Clearly the impression is that there is something extra on offer which is not listed on the menu, and it is for this reason both my friends and myself have studiously avoided this place.

But they have survived for a few years, and this fact presses my curiosity button. So is it really a restaurant? Read on and see.

The décor is pure tacky, shiny ‘bling’.

Lots of chrome and silver surrounding garish, multicolored chairs, it is simply a monument to bad taste. And on the subject of bad taste, they extended it to their food, which we found to be inedible.

What we did not find, however, was any sign of the sleazy offerings as implied in their logo and name. It really was a café but with delusions of gastronomic grandeur.

The menu boasted 79 dishes, which you and I know is utterly unsustainable, thereby guaranteeing that they will screw up the dishes up totally. And they did.

I asked if everything listed on the menu was ‘on’. “Yes” was the reply. So we ordered two starters and two mains, which took an unbelievable 45 minutes to arrive. I questioned this with our waiter, and the smartass gave me the glib answer that the delay was because we wanted all four dishes at once.

Whoooooah there – hold the horses!

With a capacity of 80 covers, if the place was full with each person ordering a starter and main, you can logically extrapolate these figures to a time of 18 hours to serve the last customer. Of course, this will not happen because there are not 80 people dumb enough to go and order at once, but I have made my point!

Off I went to a ‘Thai Green Curry’. This was a fraud, for it was nothing of the sort.

It should be made with lemon grass, Thai chili, Thai basil, Thai ginger (galangal) lime leaves, coconut milk, coriander, cumin, shrimp paste and palm sugar. What I got was a disgusting mush in which N-O-N-E of the aforementioned were used or identifiable. The House was cheating us with this falsely named dish. And it got worse.

They continued the deception with a sexy sounding ‘Jumbo prawns with asparagus, mashed pumpkins, celeriac mash with SAFFRON and aioli’ (garlic and olive oil). Bullshit! After being told that they had everything on the menu, our glib, flippant waiter Mr Smart-Ass confessed that they had no jumbo prawns, so I settled for baby prawns. But the dish arrived with flavorless mashed celeriac and pumpkin, both of which were devoid of seasoning and soaked

Un-Pop-ular: Lolly Pop is a letdown with water. Worse still, there was no asparagus. I asked Mr Smart-Ass for my missing asparagus.

“Oh … sorry but the chef just told me there was no asparagus available when I collected your dish. “ The liar was making it up as he went along.

“There is no Saffron in my dish,” I told him.

Smart-Ass replied, “Yes there is, it’s inside the mash.”

Of course it wasn’t. He neither knew nor cared. Saffron is the world’s most expensive herb. It is instantly identified as a fragile, little orange stick.

“Right, tell the chef to show me a sample of his alleged saffron.”

Smart-Ass swaggered back to me and showed me a sample of cheap, brown supermarket curry powder.

If Romania was a true European country (which it will never be in our lifetime) and embraced European culture, values, standards and integrity, this place would be closed by the authorities, and prosecuted for the crime of fraud.

More mis-described dishes followed.

Blondie ordered a ‘Chicken, bacon and Mozzarella with gratin potato’. The last potato dish means sliced potato cooked in cream, onion, white wine and topped with melted cheese to the French, and using the same word it should be sliced potato topped with cheese to the Romanians. But they failed on both accounts, as it came as a dirty brown mash containing vegetable bits.

We were so utterly pissed off with this catalogue of lies that I held my head in my hands in fearful anticipation of our ‘fajitas with guacamole, salsa and sour cream’.

All my fears were well founded, for the fajita contained chicken in an unnecessary brown gungy sauce, there was no guacamole – another House lie – as too was the so-called salsa which was nothing more than chopped tomato.

So, we had no jumbo prawns, no correct salsa, no correct green curry, no guacamole, no saffron and no seasoning. And guess what – no edible good food! This dump is just a bad joke.

I predict it will be a cold day in Hell when Romania adopts a Standards Authority with the power and will to prosecute fraudulently described restaurant dishes, because unlike the rest of Europe, Romania just doesn’t care!

michaelbarclay32@gmail.com

www.business-review.ro Business Review | November 7 - 13, 2011

18 IN TOUCH FILM REVIEW

The Adventures of Tintin: The Secret of the Unicorn ∫ DEBBIE STOWE Directed by: Steven Spielberg Starring: Jamie Bell, Andy Serkis, Simon Pegg, Nick Frost, Daniel Craig On at: Cinema City Cotroceni, Cinema City Sun Plaza, Cityplex, Corso, Grand Cinema Digiplex Baneasa, Hollywood Multiplex, Movieplex Cinema, Samsung Imax Cotroceni, The Light Cinema Almost thirty years after Steven Spielberg first acquired the rights to Belgian artist Hergé’s classic comic books, boy reporter Tintin has finally made it to the big screen, complete with his blue jersey, quiff and trusty terrier Snowy. With the double-Oscar-winning director at the helm and Peter “Lord of the Rings” Jackson producing, there was far too much cinematic fire power here for the movie not to cause a very big splash.

Generations of children have grown up reading, watching and listening to Tintin – who first appeared in the late 1920s – so the two titans had a weight of expectations to contend with. Perhaps wisely, then, they don’t take any risks.

Patching together a plot from three of the original stories, Spielberg delivers a conventional Boy’s Own adventure, marry-

WHO’S NEWS Lucian Danilescu

Fast and furious: one of The Adventures of Tintin’s thrilling action sequences ing the style and spirit of the Belgian source material with plenty of big-bucks Hollywood panache.

It works well. A maritime mystery which seems to nod to the Pirates of the Caribbean franchise is the narrative structure for some swashbuckling set pieces, as thrillingly fun as any on the screen in recent times. Spielberg knows his onions

when it comes to special effects, and it shows. Best of all is a wonderfully imaginative and realized sequence set in Morocco that culminates in a chaotic chase scene.

The film is shot using mocap, or motion capture, a weird hybrid of live action and animation that is startling in its realism. However, it creates just enough

“unreality” to soften some of the surprisingly violent episodes – an early shooting in particular may upset younger children. In general, though, this is fairly family-friendly fare.

It’s not a flawless film. Perhaps because the story is three comics melded together, at times it’s easy to lose track of what Tintin and chums are currently trying to do and why (though of course the same is true of other classic action films like Indiana Jones and North by Northwest, the latter getting a nod here while the former is heavily referenced – though as both are Spielberg’s it’s not exactly plagiarism). The hero is also somewhat bland (in keeping with the template), with humor, color and wisecracks instead provided by supporting characters such as the redeemable drunkard seaman Captain Haddock, Snowy the dog and bumbling British detectives Thompson and Thomson.

But The Adventures of Tintin remains rollicking fun, full of enthusiasm and brio, and the flick is worth seeing for the top-notch action sequences alone. With the makers already talking up the sequel, Tintin appears to be alchemizing into box office gold.

editorial@business-review.ro

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 ner with the firm’s management consulting department. He has over 18 years’ experience, 11 of which have been at partner level, and 10 of which have been focused on the Romanian market.

During his career, Bumbacea has coordinated a wide range of business advisory projects in Romania, Moldova, Serbia, the Czech Republic, Slovakia and Russia, with a focus on telecommunications, the public sector, pharmaceuticals and private equity.

plementing promotional campaigns as well as brand consolidation activities. She has over three years of professional experience in the field of marketing management. Dumitrescu has previously worked for two logistics companies, DB Schenker Romtrans and Gebruder Weiss. She graduated from the Marketing Faculty of the Academy of Economic Studies in Bucharest and holds a master’s degree in PR and marketing.

Daniela Dumitrescu

Gabriela Ceuta

Dinu Bumbacea has joined KPMG in Romania as part-

is the new marketing manager of Radisson Blu Bucharest. She will be responsible for coordinating the hotel’s marketing activities, developing and im-

is the new development & research manager of HBO Romania. She was trained as director but specialized in screenwriting, script development and

has been appointed CEO of Antena Group. He previously spent ten years as business-to-business director at Orange Romania. His task will be to coordinate the four television channels Antena 1, Antena 2, Euforia and GSP TV strategically and operationally, and work closely with the managerial team. Nanulescu was appointed to this position one and a half months after Sorin Alexandrescu submitted his resignation.

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, Michael Barclay ART DIRECTOR Alexandru Oriean PHOTOGRAPHER Laurentiu Obae LAYOUT Beatrice Gheorghiu

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

has joined the Mares & Asociatii law firm as partner. Following his appointment, the firm is changing its name to Mares, Danilescu & Asociatii. Danilescu has previously worked at Zamfirescu Racoti Predoiu (ZRP), also as partner. He has 14 years of professional experience with a focus on mergers and acquisitions, real estate transactions and capital markets. Mares & Asociatii was established in September 2011 by Mihai Mares, former office managing partner of Garrigues Romania, after the Spanish company closed its local subsidiary.

script doctoring. Ceuta has worked for Mediapro Pictures as script editor for TV productions and developer for feature and short films. At HBO she will join the original programming department and will be involved in documentary production as well as fiction.

Adrian Nanulescu