INTERVIEW: Mihai Tudor, president of MB Telecom, outlined to BR the research activity of the system integrator, which is getting ready to showcase its newest project, an aircraft scanner, at the International Exhibition of Inventions in Geneva »page 8
ROMANIA’S PREMIER BUSINESS WEEKLY
APRIL 8 - 14, 2013 / VOLUME 17, NUMBER 11
WINEMAKERS TOAST POSH PLONK The premium wine niche is the industry’s rising star, driven by demand on both local and foreign markets »page 6
NEWS
NEWS
CITY
One more try
Export beef
Historic houses
The state is hoping to raise EUR 89 million from Transgaz’s SPO, an event which pundits say could be key to relaunching local privatizations
Local meat-processing company Doly-Com says its exports fell 20 percent after it was wrongfully implicated in the horsemeat labeling scandal
A landmark of the capital’s historical center, Hanul lui Manuc is dutifully fulfilling its meeting place role more than a century since opening
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15 Years of excellence in business publishing This is not just a business, it is primarily a work of mind and soul. I think this is what we all appreciate when we come into contact with Business Review and more profoundly with the people representing Business Review. This is why, if we don't know already them, we understand they are serious professionals, we understand that they work hard to build this brand and to make this a successful business. And I know it is a successful business when I see that it is read by at least as many Romanians as foreginers working in Romania. Cătălin Crețu, Country Manager, Visa Europe - Romania
Contact Business Review for details about our subscription offers: +4 031.040.09.31; email: subscribe@business-review.ro www.business-review.ro
NEWS 3
www.business-review.ro Business Review | April 8 - 14, 2013
NEWS in brief
BUSINESS AGENDA April 9
CONSTRUCTION Ambient sales grow to EUR 150 mln in 2012
ENERGY Renewable support scheme to be suspended The government is planning to reduce the allocation of green certificates granted to renewable producers for three and a half years from July 1, in a bid to rein in energy prices, and will enforce a system that cuts the amount of incentives. Constantin Nita, delegate-energy minister, said that wind and small-hydro producers will receive one green certificate for every megawatt they produce through to January 2017, while photovoltaic will be granted two certificates. The difference in certificates to which producers are entitled will be kept in a basket by energy regulator ANRE. The news is the second blow for the renewable sector in less than a week, after the energy regulator proposed massive cuts in the support scheme. Green certificates have a regulated floor and ceiling price of EUR 28.8 and EUR 58.8 in 2013. A certificate traded in March at around EUR 52. The minister added that 50 percent of the electricity supplied to large industrial consumers will not bear the cost of green certificates. The government also wants to allow producers with assets below 5MW to sign bilateral contracts. At present, the energy law blocks the sealing of Purchasing Power Agreements (PPAs) and all deals have to be carried out on the wholesale market, OPCOM. This provision was a setback for investors seeking bank financing. Contracts for selling electricity and green certificates would act as a guarantee for companies that have taken out loans to build green projects, say players.
Photo: Cornel Constantin
Romanian construction materials distributor and DIY retailer Ambient reported a EUR 150 million turnover last year, marking a total increase of more than 47 percent over the past two years since the firm underwent a restructuring program, the company has announced. This led to the firm reporting net profit in 2012 for the first time over the past three years, said company representatives, without stating the actual figure. The 47 percent sales increase was organic, as the company did not open any new stores over the period, nor does it have concrete plans to open new outlets in 2013. Ambient runs a network of 12 DIY stores and 15 warehouse and logistics centers, which are located mostly in Transylvania.
IMAGE of the week Bucharest’s ASE marks a century of existence The first institution of higher economic education in Romania – the Academy of High Commercial and Industrial Studies (ASE) – was established on April 6, 1913, by Royal Decree. In its 100 years of history, the academy has contributed to shaping the destinies of the over 300,000 young people who have passed through its doors.
INVESTMENT
LEGAL
Holzindustrie Schweighofer to invest EUR 150 mln in woodworking factory
Law firm Dentons launches on local market
Austrian Holzindustrie Schweighofer, a wood processing company, will invest EUR 150 million in a 70-hectare woodworking plant in Covasna County, which should become operational by 2014. Around 80 percent of the produced lumber will be exported to Asia, mainly Japan. The new plant has a projected cutting capacity of 800,000 cbm, with 70 percent of the produced lumber further processed.The plant will create 650 new direct jobs and another 2,000 in related industries. The company is currently looking for local partners to build and operate the plant. Schweighofer Group has four production sites in Romania.
LEASING BRD Sogelease financing rises to EUR 92 mln in 2012 BRD Sogelease, the financial leasing arm of BRD, granted EUR 92 of financing in 2012, an increase of 11 percent from 2011, while the number of leasing contracts reached 1,890. The car segment accounted for 58.4 percent of the sum, and equipment 40.6 percent, driven by higher demand from the construction and manufacturing sectors.
Dentons, a new global law firm resulting from the merger of international law firm Salans LLP, Canadian outfit Fraser Milner Casgrain LLP (FMC) and international company SNR Denton, is making its official launch on the local market. The firm provides assistance in every type of law including civil, English and US common law, Sharia and Chinese legal and regulatory issues. The firm has more than 2,500 lawyers and professionals in 79 locations in 52 counties across Africa, Asia Pacific, Canada, Central Asia, Europe, the Middle East, Russia and the CIS, the UK and the US.
LOGISTICS Gefco Romania’s turnover down EUR 1 mln in 2012 The local subsidiary of logistics supplier Gefco registered a turnover of EUR 42.3 million in 2012, down from EUR 43.3 million the previous year, the company has announced. Net profit was EUR 1.96 million, or about 4.64 percent of the turnover. While the beginning of 2012 was promising, in the last half of the year business slowed down, said Christophe De Korver, general manager of Gefco Romania.
08:30 AmCham Romania, AmCham EU and the Local American Working Group organize in partnership with the Commercial Service of the US Embassy a roundtable called European Perspectives in Healthcare at Howard Johnson Hotel. By invitation only. 09:30 ∫EVENT Business Review organizes an IT&C roundtable, at which Clevel executives have their say on the management challenges triggered by shifting consumer behavior and preferences. By invitation only. Find out more at www.business-review.ro/brevents.
April 10
11:00 3M Romania organizes a press conference to mark the launch of a campaign to support Romanian inventors at Novotel Hotel. By invitation only. 19:00 Regina Maria organizes an event to mark the launch of the Royal Club of Doctors at Radisson Blu Hotel. By invitation only.
April 20-21 The Maastricht School of Management Romania organizes a sales course as part of a new executive training program. Participation is fee-based. Find out more at www.msmromania.org/content/open-enrollment-courses
April 23 ∫EVENT
09:00 Business Review organizes the fourth edition of Focus on Employment &HR, an event that covers various aspects of the labor market, ranging from legislative challenges to the use of innovative recruitment tools, at Ramada Plaza Bucharest. By invitation only.
May 13 ∫EVENT
09:00 Business Review organizes Focus on Energy, an event that gauges trends in the domestic energy market. Find out more at www.business-review.ro/brevents.
May 22
09:00 HART Consulting organizes the sixth edition of the HART HR Strategic Conference, entitled CEOs and Organizational Culture: What Makes it or breaks it? Participation is fee based. For registration, e-mail consulting@hart.ro
4 NEWS
www.business-review.ro Business Review | April 8 - 14, 2013
INNOVATION
STOCK EXCHANGE
Romania lags behind Transgaz SPO launches in innovation barometer on BSE
R
omania is among the worst performing countries for the government regulations that drive innovation forward, according to the GE Global Innovation Barometer 2013. In the protection of intellectual property, Romania came fifth last out of fifty countries, ahead only of Russia, Thailand, Turkey and Vietnam. In terms of legislative transparency, Romania placed third to last in the global ranking, followed by Russia and Vietnam. Companies in Romania find it hard to obtain information about modifications made to governmental policies, which affects their activity, found the researchers. Similarly, regarding the impact of taxation on stimulants for developing economic activity or making an investment, Romania is also third to last, followed by Russia and Turkey. In terms of infrastructure such as transportation, telephony and energy, Romania was placed third to last again, ahead only of Russia and Vietnam. The country came fourth to last (followed by Russia, South Africa and Thailand) in the field of public acquisitions made to ensure the necessary
technology for innovators and in the same position in the existence of the newest technologies (ahead of Russia, Thailand and Vietnam). Romania’s situation is no better when it comes to the adoption of technologies among companies and the capacity to innovate, coming third to last. Companies in Romania obtain technology exclusively from licenses or imitating foreign companies. Nor does Romania score well when it comes to promoting its innovations. Local companies do not use sophisticated marketing tools and techniques. In this chapter, Romania was ranked fourth to last, followed by Russia, Thailand and Vietnam. “Romania hasn’t fully exploited the benefits of EU funds, but it can catch up in the next funding period. As an ex-ante condition, the EU requires the states to have a strategy for attracting these funds and Romania must draft it by 2016. An annual verification, with absorption targets for each country, might also be possible,” said Laurentiu Dinu, executive director at Accreo Romania. ∫ Otilia Haraga
T
he secondary public offering (SPO) of state-owned gas transport company Transgaz kicked off last week, marking a fresh resumption of a privatization program that has suffered major delays. The Transgaz SPO is expected to raise around EUR 89 million for the state coffers, more than one year after grid operator Transelectrica raised EUR 37 million from its SPO. Romania is trying to improve the financial performance of state-owned companies by selling minority stakes on the Bucharest Stock Exchange (BSE) and appointing private managers and boards, as part of a EUR 5 billion agreement with the IMF, EC and World Bank. “The Transgaz offer is the first rain after a year of drought and might be a road opener for new listings in Romgaz, Nuclearelectrica and Hidroelectrica,” said Lucian Anghel, BSE president. Constantin Nita, minister-delegate for energy, has advanced some listing deadlines for other companies in the state portfolio. He reckons the Transgaz offer is “built not to fail” as it is the first one based on international standards. “A failure would be a negative signal
for the company and the domestic capital market, but I don’t expect it,” said Nita. The initial public offering (IPO) in Nuclearelectrica, the nuclear power producer, is expected next month, followed by gas producer Romgaz, hydro power producer Hidroelectrica – expected to exit insolvency in July – and the Oltenia Energy Holding in September. The Transgaz offer has three subscription thresholds, driven by international investors, which have got 85 percent of the shares. There will be two retail segments, based on the number of subscribed shares, which will be discounted by 3 or 5 percent, depending on the subscription date. The SPO will run for nine working days and will be completed on April 16. The subscription price for institutional investors stands between RON 171 and RON 230 per share, inclusive. The minimum price is around 20 percent lower than the closing share price on the day before the launch of the SPO. The underwriting syndicate comprises Raiffeisen Capital & Investment (lead manager), Wood & Co Financial Services and BT Securities. ∫ Ovidiu Posirca
WHO’S NEWS
AmCham elects new president and board
Valeriu Nistor, the new AmCham president
V
aleriu Nistor has been elected president of the American Chamber of Commerce (AmCham) following the annual general meeting and elections for the board of directors and auditing committee. He replaces Sorin Mindrutescu. Nistor is the country sales director of IBM
Romania, a position he has held since January 2013. He previously worked at Xerox for over 10 years. Between 2004 and 2006, Nistor was country general manager of Xerox Austria, having been country general manager of Xerox Romania and the Republic of Moldova between 2001 and 2003. The new vice-presidents of AmCham are Radu Florescu, CEO of Saatchi & Saatchi, and Nadia Crisan, managing director of McGuireWoods Consulting Romania, while James Stewart, vice-president of Raiffeisen Bank, was appointed treasurer. Board members at large now include Violeta Ciurel, president & CEO of Axa Life Insurance; Valeriu Binig, director, energy & resources leader at Deloitte; Bogdan Ion, country managing partner at Ernst & Young; Anda Todor, managing partner at Dentons; Daniela Nemoianu, executive partner at KPMG Romania; Sorin Mindrutescu, country general manager of Oracle Romania; and Hans Dewaele, vice-president and general manager of Procter & Gamble Balkans. ∫ Otilia Haraga
NEWS 5
www.business-review.ro Business Review | April 8 - 14, 2013
FMCG
PARTNER CONTENT
European horsemeat scandal cuts Doly-Com’s exports by 20 percent
ROMANIA VAT UPDATE: Open market value as taxable amount for supplies to affiliates
The company estimates the Romanian beef market to be worth some EUR 70-80 million this year, whereas the average Romanian eats 60 kilos of meat per year, half of which is pork, about 35 percent is poultry while beef accounts for 10 percent. One of DolyCom’s strategies for the local market is to promote its own brands of freshly packaged beef.
by Bogdan Costea, Tax Partner at Viboal FindEx; Delia Catarama, Tax Partner at Viboal FindEx
The horsemeat scandal: the producer’s perspective Courtesy of Doly-Com
Iulian Cazacut, owner of Doly-Com
R
omanian meat-processing company Doly-Com is targeting a EUR 34 million turnover this year, close to the level reported in 2012, given the evolution of the purchasing power as well as the recent horsemeat scandal. After the producer was wrongfully accused of having been one of the players responsible for the mislabeling of horsemeat as beef this February, its exports dropped by about 20 percent, said Iulian Cazacut, DolyCom’s owner and general manager. The company runs an abattoir in Roma, a village near Botosani in northeastern Romania, where it processes beef (50 percent of production), pork (45 percent of production) and horsemeat (5 percent). Doly-Com says its abattoir is the largest for cattle and horses in the country, and it is also the largest fresh meat-packaging plant. Some 90 percent of the firm’s exports consist of beef, while the rest are horsemeat, which the company started processing and selling abroad in 2011 after seeing demand from Western Europe. Doly-Com’s main export markets are Austria, France, the Netherlands, Italy, Sweden, Germany and Bulgaria as well as countries outside the EU. Despite the recent scandal, Cazacut says exports will continue to be a focus even if demand for horsemeat has fallen in response to public opinion. Sold volumes have dropped and some contracts were suspended. “Nevertheless, things are evolving in a positive direction, but it takes time and the involvement of the authorities,” said Vasile Urzica, Doly-Com’s strategy and development manager.
It all started in early February in the UK after horsemeat was found in products labeled as containing only beef, but soon spread to the rest of Europe. The Romanian meat industry undeservedly found itself in the spotlight in the early phase of the scandal after local processors – later identified as Carmolimp and Doly-Com – were initially accused by the French authorities of mislabeling meat. It was later revealed that in fact French meat- processing company Spanghero was the guilty party. Cazacut said he first heard the accusations on the morning of Saturday, February 9, and by Monday had put together all the paperwork and electronic registrations necessary for the Romanian authorities’ investigation. Documents proved that the exported horsemeat left the Bacau abattoir labeled correctly. “As we exported both beef and horsemeat we had to prove we weren’t responsible for any mislabeling. We immediately understood that we had to react quickly, to be open and have a well documented response in order not to leave room for any doubts,” said the GM, adding that, in his opinion, the authorities handled the scandal properly. The same Monday, the company sent emails to all its European clients informing them about the situation and recommending DNA tests at Doly-Com’s expense for the already exported beef in order to reassure them. No problems were found, says the 45-year-old entrepreneur, who has invested some EUR 10 million in the business since setting it up in 1997. Over the following days, DolyCom’s management was busy with numerous visits from international media outlets. Most of the journalists who came to the Bacau meat-processing facility were taken aback by the abattoir’s technological level, says the GM., adding that he found the subsequent media coverage to be objective. ∫ Simona Bazavan
Starting with 1st of February 2013, article 80 from the VAT directive (2006/112/EC) has been transposed into the Romanian VAT legislation. In this respect, transactions carried out with related parties can now be subject to adjustments of the taxable amount in case of failure to comply with the arm’s length principle. According to Delia Catarama, Tax Partner at Viboal FindEx, it is important to note that open market valuation for VAT purposes is restricted to exceptional cases and can be applied in transactions between related parties only when VAT is no longer neutral due to restrictions in the deduction right of the related parties. According to article 80 from the VAT directive, there are three specific cases when VAT neutrality may be distorted due to noncompliance with the arm’s length principle and these cases were equally transposed in the Romanian VAT legislation. Previous to this legislative change, the domestic VAT legislation made no distinction between the taxable amount of supplies to related parties and the taxable amount of supplies to independent third parties. “Even before open market valuation was permitted by the Romanian VAT legislation, we faced some attempts from local tax authorities of imposing the open market value as the taxable amount for transactions between affiliates. During our transfer pricing assistance and dispute resolution assignments we managed to successfully challenge such attempts on behalf of our clients and to repeal any rulings in this respect.” stated Ms Catarama. Part of Ms Catarama’s presentation was focused on a case-study
analysis, highlighting the poor tax specialisation among tax auditors. It is a known fact that they frequently confuse the basic principles and concepts behind the VAT system with those used for corporate tax purposes or for accounting reasons. Due to such confusions, tax auditors may incorrectly charge additional tax and penalties to taxpayers. “Here at Viboal FindEx one of our main goals is to ensure that the tax legislation is correctly enforced and that no abuse is carried out, either knowingly or not, by the tax authority. This is why we manage to notice and successfully challenge on behalf of our clients any faulty application of the tax law.” stated Mr Bogdan Costea, also a Tax Partner at Viboal FindEx. Ever since the transfer pricing legislation has been enacted in Romania, transfer pricing audits have always been and most probably will continue to be an important source of income for the Romanian tax authority. “Due to these recent changes, transfer pricing will most probably start to generate business implications from a VAT perspective as well. “Based on our extensive experience with VAT and transfer pricing audits I can confirm that open market valuation is becoming widely used during tax audits. As this concept is a quite complex, it is important to hold the necessary knowhow in order to accurately follow and correct, if necessary, the reasoning of tax auditors. Moreover, improvements in international guidelines and regulations for transfer pricing are gradually transposed in the Romanian legislation as well, so it is important to always be a step ahead and to learn any new concepts and approaches in this area. With the help of our Altus Alliance we manage to do just that.” added Ms Catarama. ∫
6 FOCUS
www.business-review.ro Business Review | April 8 - 14, 2013
Romanians acquire a nose for premium wine Although premium bottles are estimated to represent no more than 10 percent of the Romanian wine market, the upmarket niche has become the industry’s rising star, growing steadily over recent years, driven both by demand from more refined local consumers and from foreign markets. And the trend should only get stronger, producers told BR. ∫ SIMONA BAZAVAN To put it simply, a premium wine is the very best a winery has to offer in terms of quality. Everything matters – from the characteristics of the soil, the age of the vine, the weather conditions and time of harvest, the selection of the grapes, the expertise of the winemaker, the technologies used, the storage and aging process to the shape of the bottle, the label’s texture and the story behind the brand. Such wines are increasingly in demand locally, producers say, which has led to the local industry experiencing something of a mini-boom of late, with foreign investors as well as Romanian entrepreneurs acquiring a
taste for the viticulture business and premium wine production in particular. Premium wines can be found almost exclusively in HoReCa and specialized wine shops, the number of which has also been going up in recent years, both online and offline, for prices of over USD 5 per bottle or between EUR 10 and EUR 25, according to producers’ estimations. Winemakers have mixed projections about the overall evolution of the Romanian wine market. While some are confident the market will see some growth, others are less optimistic and even expect drops. “Considering that the purchasing power of the Romanian consumer has been decreasing over the past couple
of years, I think that a level similar to the one reported last year is a realistic estimation, or even a little optimistic,” Roxana Sabau, key account manager at Serve, told BR. However, one aspect on which everyone agrees is that consumption behavior has changed over the past couple of years and a certain polarization has taken place. “We can see a migration [...] towards the two extremes of the market – bulk wine or bag-inbox on one hand and a small share of the public which can afford to upgrade to quality premium wine, locally produced or imported, on the other hand,” she outlined. Regardless of how the total wine sales have evolved or what can be expected from 2013, the premium niche has been growing for the past couple of years and, more importantly, will continue to do so, producers stress. With no official data available so far, premium sales are estimated to represent up to 10 percent of a total market which reached EUR 400 million in 2011. The Romanian wine market will expand in 2013, and the premium segment in particular, Aurelia Visinescu, winemaker and managing director of Domeniile Sahateni, told BR. “This segment is growing slowly but steadily because consumers are developing an increasing interest in premium wines and are more willing to pay more for such wines,” she said. Mircea Niculescu, sales director at WineRo, predicts the total market will post a decrease this year but stresses that the full half of the glass is that as consumers grow more knowledgeable, the niche for premium wine expands. The trend started in 2011, says Niculescu, and will probably continue in 2013. Imports of premium wines have also gone up, but locally-produced premium wines cover most of the demand, he believes. Others agree that the high end of the market is holding its ground. “Consumers are starting to care more about the quality level of the wines they drink and one can see they are paying much more attention when choosing wine,” Ioana Micu, executive manager of Amb Wine, told BR. And while consumption behavior
and preferences can change on a yearly basis, “the direction towards quality wine is clear,” added Ciprian Rosca, commercial director at Recas Winery. Another driver is wine tourism which has been catching on locally too, Walter Friedl, partner with Lacerta Winery, told BR. “There is a trend towards wine tourism. Romanian wine consumers are very interested in the production of wines and enjoy learning more about them and the pairing of wine and food,” he told BR. The premium market continues to be dominated by the large Romanian wine producers who over recent years have invested in the production and marketing of premium products. However, the growth potential of this market can also be seen from the fact that several wineries that own fewer than 100 hectares of vineyard and take pride in producing solely premium wines have been set up, even during the crisis years. One of these investments is the Vila Dobrusa vineyard estate in Dragasani, which produces exclusively premium wines under the Avincis brand. “We can see a rather important focus on premium wines coming from Romanian consumers, that there is interest in the niche wine produced by small wineries such as Avincis and that local varieties are being increasingly sought,” Cristiana I. Stoica, owner of Vila Dobrusa, told BR. Despite this growing interest, competition is getting fiercer, both on the domestic market and abroad, and purchasing power restraints are affecting even the premium segment, she adds. “At present, not only in Romania but also abroad, the wine consumer is more reserved, spends less, consumes less, but at the same time the demands he or she has from a premium wine are the same. Therefore, the premium market itself will have to be diversified,” argued the Avincis owner. A good price-quality ratio is essential; however, this doesn’t always come easy as making premium wine means higher costs and more consistent investments than for a regular variety, she notes. Premium wines represent a strong focus in the future strategy of local
FOCUS 7
www.business-review.ro Business Review | April 8 - 14, 2013
winemakers, even if they are addressing more than just this market segment. Recas Winery has three premium brands in its portfolio – Sole, Solo Quinta and Cuvee Uberland – and says it plans to further expand in this direction as it has had the best performance in recent years and will most likely remain on an upward trend. Ever since 2008, premium wines have represented more than 20 percent of the producer’s sales. The Recas group of companies had a combined turnover of some EUR 20 million last year, which it plans to boost by 15 percent in 2013. However, growth is mostly expected to come from external markets, where last year it exported some 3 million bottles of wine to countries such as England and other European markets, the USA, Canada, Japan, Russia and Australia. Exports should grow by another 1 million bottles this year. WineRo is another producer of exclusively premium wines. The company, which was set up in 2006 and whose shareholders include Stephan von Neipperg, who owns several vineyards in Bordeaux, and Karl-Heinz Hauptmann, a former director at Merrill Lynch London, owns the Alira brand. It plans to sell some 100,000 bottles this year and start exporting. At Domeniile Sahateni premium wines represent some 70 percent of
total sales and more than half of the winery’s volumes are exported across the world – from European countries to Taiwan and Canada and even Brazil. Last year the company reported a turnover of some EUR 2 million which it plans to grow by 30 percent this year. Lacerta too estimates rising sales of up to EUR 1 million in 2013, up 20 percent y-o-y, says Friedl. Amb Wine is another recent wine investment. The winery, which is part of Austrian amb Holding, launched the Liliac premium brand in early 2012 and estimates this year it will reach a turnover of RON 1.6 million (approximately EUR 360,000). The wine is available only in HoReCa and specialized shops but this year the company also plans to launch a retail brand under the name of Crepuscul. So far the winemaker has targeted the local market but has also exported to Austria and Germany, says Micu. Elsewhere, approximately 35 percent of Serve’s sales on the domestic market and 10 percent of exports are represented by premium wines such as Terra Romana, Cuvee Charlotte and Amaury. Although domestic sales of premium wines went up by as much as 30 percent last year, Sabau doesn’t see significant growth potential locally. Outside Romania, demand comes from China and even Northern Europe, following the poor wine production across the continent in recent years,
which led to consumers trying new wines, including Romanian ones. All in all, the company plans to increase its share of premium wines to 70 percent of total production, and after reporting a turnover of EUR 2.5 million last year, expects a 5 percent growth in 2013, says Sabau.
“Romania will reach the level where it is recognized as a producer of premium wines only when it manages to build a unitary strategy for external promotion. Individual promotion by each producer is not sufficient to create the message of a premiumwine producing country,” argued Micu. However, the investment in a proUncorking external markets To say that Romania has the potential motion campaign with a global impact to brand itself as a producer of wine, is not something that can be borne by and why not a producer of premium a single producer or even a producers’ wines in particular, has become a re- association, says Sabau, stressing the dundant topic locally, but the reality need for at least a medium-term naoutside the country is that Romania tional strategy in this direction and financial support from the state. and wine are not often associated. “The New World – Chile, Argentina “The greatest issue is low awareness and of course the bad reputation of and New Zealand – has invested milRomanian wines. Abroad we are lions each year for more than a decade known as producers of cheap and in order to position themselves as poor quality wine. This is something wine producers. The money came that small Romanian premium winer- from the countries’ governments as ies like us are trying to change,” says part of a program of strategic importance. Only something like this could Niculescu. Nevertheless, the past years help us,” she added. Nevertheless there is reason for have brought major changes for the local premium wine industry, but al- cheer. “We believe that Romanian prethough there have been “remarkable mium wines will be (re-)discovered in improvements, we still have a long the coming years. There have recently way to go until we are recognized been some very nice articles about the at international level,” added ‘NEW, new world of wines’ in Eastern Europe with Dealu Mare as the ‘New Visinescu. There have been numerous indi- Bordeaux’ in that new wine region in vidual successes over the past year the world press,” said Friedl. and international awards won by Romanian winemakers, but this is not simona.bazavan@business-review.ro enough to create momentum.
8 INTERVIEW
www.business-review.ro Business Review | April 8 - 14, 2013
MB Telecom p invention at G Romanian company MB Telecom, a system integrator that designs and installs hi-tech equipment, generally as part of large-scale security projects, is preparing to showcase its new venture at the International Exhibition of Inventions in Geneva. President Mihai Tudor tells BR what it is about and details the research activity going on at MB Telecom at the moment.
Courtesy of MB Telecom
âˆŤ OTILIA HARAGA You are about to take part in this year’s International Exhibition of Inventions in Geneva. What is your project about and what investment did it require? Work on the Roboscan Aeria project, the first aircraft scanner in the world, began in 2009, right after we won the grand prize at the Exhibition of Inventions in Geneva for the truck and con-
tainer scanner with which we were competing that year. Currently, many entities from all over the world are trying to develop a solution for scanning planes, but we are the first to have identified a technologically mature solution which materialized into a functional prototype that we will exhibit in Geneva, between April 10 and 14. We have invested over EUR 8 million in this project, and the funds have so far come from our own resources.
INTERVIEW 9
www.business-review.ro Business Review | April 8 - 14, 2013
m pitches new Geneva expo How much does MB Telecom invest annually in research and where do you get the capital for this? In recent years we have re-invested over 80 percent of the profit we have made in research. With our other projects, we have managed to attract public funds for financing applicative research, but unfortunately for the Roboscan Aeria project, we did not manage to persuade the Romanian authorities that it deserved to be supported, in spite of the fact that it is a strategic and unique project globally and there is a substantial market for it. During a recent national competition for financing research, this project was ranked in a very modest position, coming 38th out of 80 projects submitted. What revenues and proďŹ t did MB Telecom post last year and what estimations do you have for 2013? We closed 2012 with a turnover in excess of RON 42 million (approximately EUR 9.5 million) and a profit of more than RON 15 million (approximately EUR 3.4 million). We hope to post figures at least at the level of these indicators in 2013. What types of projects are currently in the works at MB Telecom? Generally, how many of them do not work out in the end? In our East European Center for Integrated Applied Research, which we recently inaugurated, we have in development various projects in the fields of banking security, cross-border security, medical imaging, metal processing, intelligent building management solutions and similar. Some of the projects are in the final stage, meaning the developed solutions and technologies are being certified; others are in the embryonic stage. The dynamic of the projects and their complexity is great, as each project draws on various disciplines within an applicative platform. We are developing an entire industry on the horizontal, which is participating in the projects with us, especially in the last stages of carrying out experimental models and developing technologies for mass production. So far, the success rate of our projects has been very good. There was only one project proposed to us by external partners that was abandoned
because it did not have a chance of success. Do you have projects in collaboration with the state sector? What sum does such a project typically amount to? If we are talking about projects for implementing cross-border security systems, where we are market leaders, it is clear that only the state can invest in such projects. If we are talking about research projects, the ratio of these projects with public financing is under 10 percent of the funds we allocate to research. For example, we implemented the Customs Integrated Security System for the Schengen Border, a multi-annual project worth millions of EUR, which has been positively evaluated by all the teams from the European Union. Have you also delivered projects for other states? What were these projects about? We did the integrated security system of Maputo International Airport in Mozambique, which was successfully completed and totaled several million USD. Currently, we are making offers for various projects for public entities in different corners of the world, from the Far East, through the Arab countries to North and South America. Representatives of these states have already expressed their interest in visiting our stand at the Exhibition of Inventions in Geneva. How many employees does MB Telecom have and how many does the research team number? Currently we have over 120 employees, half of whom are involved in applicative research projects. It is worth mentioning that with the implementation of the East European Center for Integrated Applied Research, the number of employees has had a growth rate of at least 10 percent a year, even during crisis periods. What is the shareholding structure of MB Telecom at the moment? Currently, the shareholders of MB Telecom are me, with an 80 percent stake, and Mariana Chirita with 20 percent. However, I also plan to include my children in the company’s shareholding structure, and not just in the management, as is the current situation. otilia.haraga@business-review.ro
www.business-review.ro Business Review | April 8 - 14, 2013
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Romania seeks to expand taxable base Romania has increased the deductibility for R&D expenditure to 50 percent in order to support economic growth, but has imposed a mandatory tax for microenterprises in an effort to increase collection. Artificial transactions have come under increased scrutiny from authorities seeking to combat fraud, while the taxation rate of nonresidents’ revenues wired in off-shores will be raised to 50 percent, said experts during the Tax & Law event organized last week by Business Review. ∫ OVIDIU POSIRCA In February, the turnover threshold under which companies are considered microenterprises was cut to an annual EUR 65,000, and a mandatory 3 percent tax on revenues was imposed. Florin Gherghel, head of the tax department at Noerr Finance & Tax, expects the budget collection to increase as a result of this initiative. “The disadvantage of this measure is that no newly launched company will benefit from a fiscal deduction for investments,” said Gherghel. Meanwhile, the additional deducibility for R&D expenditure rose to 50 percent and applies to activities carried out both in Romania and abroad. Companies are still waiting for the publishing of the application norms to see how they can use this fiscal facility. The legislation was amended by authorities who enforced new provisions on VAT adjustments for goods missing from the recordkeeping. VAT will not be adjusted for leasing firms that attempt to recover goods in the event of terminated leasing contracts, according to Mariana Vizoli, director of the VAT legislation department at the Ministry of Public Finance. In addition, beneficiaries can deduct VAT based on issued invoices worth below EUR 100 (VAT included), if the supplier has mentioned the beneficiary’s VAT registration code on the invoice, according to Vizoli. This also applies to the acquisition of car fuel based on invoices. Delia Catarama, partner at Viboal Findex, a tax consultancy, commented of the readjustment of VAT in transactions that the reconsideration of VAT at the market price is regulated and only works when VAT is neutral, when there are restrictions on the right to deduct.
Improving competitiveness through taxation Companies active in Romania are grappling with aggressive tax audits as the authorities aim to increase tax revenues, said Mark Gibbins, partner, head of taxation at the professional services firm KPMG, who presented this year’s legislative challenges for the tax system.
The KPMG partner added that a tax consolidation regime (tax grouping) would increase Romania’s competitiveness along with the enforcement of a holding company regime. Dragos Doros, partner at NNDKP Tax Advisory Services, said the Ministry of Finance was currently working on holding regulation, as part of a wider effort to rewrite the Fiscal Code and the Fiscal Procedure Code. A cap of the computation of social health insurance contributions would be another measure welcomed by employers, said Gibbins.
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Expanding the taxation base
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1. Panelists outlined the latest fiscal trends 2. Presenting financing options for companies during the Access to Finance workshop 3. Participants at the Transfer Pricing workshop
“We’re continuing to see aggressive tax audits and growing tax litigation,” said Gibbins. He added that Romania plans to increase tax collection and improve its efforts to combat tax evasion. The business community would like
to see a more expanded, expedient and comprehensive tax ruling system and stable tax legislation without major changes at short notice, said Gibbins. He commented that a swift refund process coupled with a reduction of red tape would help businesses.
Increasing the tax collection has been one of the objectives outlined by the current government, which wants to increase the taxation base in various fields. More traders registering revenue from the fisheries, forestry and agriculture sector will pay social security contributions, according to Luisiana Dobrinescu, partner at law firm Dobrinescu Dobrev. Gabriel Biris, partner at law firm Biris Goran, urged the public authorities to reform the existing social contributions system, calling it a nightmare. Meanwhile, since February, revenues obtained by non-residents that provide services abroad have also been made taxable, except for those obtained through international transport activity, said Otilia Bujor, tax manager at PKF Finconta, a tax consultancy. Revenues registered in countries that do not have a double tax avoidance agreement with Romania will be taxed 50 percent. “The government is aiming to reduce transactions with off-shores, but this impacts trade relations with countries that haven’t closed a double tax avoidance agreement with Romania,” stated Bujor. Romania has signed such treaties with only 86 countries. The cash funneled through tax havens is an issue of great concern to the EU, which estimates that around EUR 1 trillion is lost yearly through tax evasion and avoidance. Florentina Susnea, general director of PKF Finconta, explained that Romania has transposed into domestic legislation the concept of artificial transactions, whose sole purpose is to
www.business-review.ro Business Review | April 8 - 14, 2013
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All photos: Silviu Pal
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1. Florin Gherghel, head of the tax department, Noerr Finance & Tax 2. Delia Catarama, partner, Viboal Findex 3. Gabriel Biris, partner, Biris Goran, and Mariana Vizoli, director of the VAT legislation department, Ministry of Public Finance 4. Dragos Doros, partner, NNDKP Tax Advisory Services 5. Mark Gibbins, partner, head of taxation, KPMG
avoid tax or gain an advantage. Such transactions are usually carried out with tax havens. Romania is also trying to prevent companies from resorting to aggressive fiscal planning, which is another recommendation of the European Commission, the executive body of the EU. “Fiscal planning doesn’t necessary mean fiscal evasion and the EU is currently fighting against the transactions (artificial),” said Susnea. Tax havens Barbados, Bermuda and the British Virgin Islands attracted more FDI that Germany in 2010, according to IMF data. The three islands accounted for 5.1 percent of the global FDI, compared to 4.7 percent for Germany and 3.7 percent for Japan. Aside from tax-related changes, Romania also enforced the New Civil Procedure Code in February, which
brought in many updates, including the payment ordinance procedure. This procedure applies to certain receivables stemming from a civil contract or determined through a regulation or other legal instrument, according to Liliana Dragomir, partner at Baker Tilly Romania Legal Services. Business Review also organized two workshops on Transfer Pricing and Access to Finance – state aid and EU funds. Nadia Oanea, tax manager and head of the tax department at Baker Tilly accountancy, warned that an aggressive policy on transfer pricing will see companies come under intense scrutiny from tax authorities, also generating negative publicity. ovidiu.posirca@business-review.ro
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www.business-review.ro Business Review | April 8 - 14, 2013
Inn-side a piece of Bucharest history A tour of Bucharest’s Old Town wouldn’t be complete without a stop at Hanul lui Manuc (Manuc’s Inn), a landmark of the country’s tumultuous history that dates back to the 18th century, evocative of the local Brancoveanu style of architecture, with tall arches and terraces surrounding the interior garden.
All photos: Mihai Constantineanu/ Silviu Pal
The tall arches and terraces are a landmark of the building
Historical details add to the color
The inn was given back to its rightful owners in 2007
The interior garden
The Dambovita-facing side of the inn
Built in 1808, by the mid-19th century the inn had become the city’s most important commercial spot, with 15 storage sites, 23 stores, 107 rooms and a salon. The construction, which stands on a site of approximately 3,000 sqm, was started by Emanuel (Manuc) Marzaian, also known as Manuc Bei, a wealthy merchant and politician of the 1800s. After his death in 1816, the inn was sold to Dimitrie D. Dedu and Nicolae Alexiu, then resold several times, and
Manuc Levantin. A winery is set to open this year as well. The site has witnessed some of the most important moments in the country’s history. The Bucharest Peace Treaty was sealed here in May 1812, and talks preceding Romania’s entry into the First World War took place here. The pact by which Romania ceded Basarabia to Russia was also signed on the premises. The inn had no standard inventory of furniture as many of its guests lived here for peri-
ods of six months or longer and used to decorate their rooms to their liking, bringing their own furniture. Overall, the site stands out with its cosmopolitan spirit, which reflects that of its founder, Armenian Manuc, who lived in Turkey, Russia and Romania. Its caravanserai style is reminiscent of an oriental-architecture fortress, offering a safe place for merchants coming with their goods in caravans and looking for a safe space to rest. ∫
in 1862 its new owner, Lambru Vasilescu, changed its name to Hotel Dacia. The inn did not escape the communist nationalizations and in 1949 entered into the state’s administration. It was given back to Prince Serban-Constantin Cantacuzino in 2007, after a ten-year lawsuit, when the prince proved he was the greatgrandson and successor of owner Cleopatra Baicoianu. Today the inn hosts, among other venues, a café, the Manuc Bistro and Lebanese restaurant
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www.business-review.ro Business Review | April 8 - 14, 2013
EXPAT EXPERIENCE
Blade runner: drama on the 66 bus After a brush with crime, Debbie Stowe reflects on expats’ feelings of safety in Bucharest.
On the buses: many Western European expats describe Bucharest as a safer city than their hometowns
DEBBIE STOWE One of the attractions expats cite about Bucharest that frequently surprises Romanians is its safety. Here I wander in the park at night; in the UK I wouldn’t enter a park after dusk, for fear of ciderdrinking teenagers, perverts and muggers. A night out in a typical British town can require the negotiation of hordes of drunken revelers, of whom I was once one; now it looks like carnage. (It’s a paradox that while alcohol seems more embedded in daily life here – on sale in cinemas and McDonald’s, and featuring in folk songs – obvious intoxication is more apparent in the UK.) In the wake of terrorist atrocities such as the 7/7 bombings in London, it’s reassuring to think that the Bucharest metro is probably not a top al-Qaeda target. An officer who escorted me to work amid street closures for the NATO conference told me he worked in antiterrorism. “Does Romania have terrorism?” I asked. “No,” he admitted. My mother was once alarmed at the TV headline, “Massive Attack in Bucharest”. But it was about music, not a massacre. So snug in my sense of security, I was taken aback last week when, on the 66 bus, a 50-something man produced a knife and started lunging back and forth at other passengers. As most public transport users know, disturbed or destitute bus riders are not uncommon. However, they are not usually armed. The unfortunate chap receiving the majority of the knifeman’s blade-brandishing attentions was heeding the number one rule when faced with weirdness on public transport and doing his best to ignore it. One by one
the other passengers edged to the exit by the driver, until we were grouped tightly, mutual human shields. After an interminable period, the bus reached a stop and we flooded off. A well-built man alerted the driver to the incident, before taking matters into his own hands and literally throwing the knifeman off the bus so that he collapsed in a heap in the gutter. The passengers waiting at the stop, having witnessed only a young, robust man forcibly ejecting an elderly man from the vehicle, set about helping him up. As I went on my way, by foot, I replayed the incident with various alternative endings, which ranged from me using the darts in my pocket (I was en route to a match) to subdue the threat, John McClane style, to my briefly ending up as a minor news item on the BBC website that you see sometimes when British expats meet their demise abroad. But while it was unnerving, I don’t feel any more imperiled in Bucharest or on its buses. It mainly underlined the need for mental health outreach services, so individuals with untreated conditions can get help. If anything, its rarity was a reminder of how safe Bucharest otherwise feels. While any place has its violence, the streets of the capital seem free from the worst of serious crime, from the bus upward. And this is not an Eastern European phenomenon: in Bulgaria, high-level hits are more common. Perhaps this partly comes down to the difficulty of getting things done here: it’s hard enough to sort out your taxes, never mind commission an assassination. As one businessman put it to me, “There is no organized crime in Romania – Romania is too disorganized.” ∫
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www.business-review.ro Business Review | April 8-14, 2013
DON’T MISS ELEVATION QUARTET - “MYSTERY” CD RELEASE CONCERT
Discography
Courtesy of Lucian Ban
Jazz pianist and composer Lucian Ban
part of the international release tour of his Mystery album, produced by Sunnyside Records, featuring world renowned tenor sax ArCuB, 14 Batiste player Abraham Burton, Nasheet April 27, 20.00 Waits on drums and bassist John Described as “one of the most Hebert. The quartet have been playing gifted pianists to move to New York in the past decade” by jazz together for sometime now, arcritic Bruce Lee Gallanter, Lucian riving at a specific sound that Ban has managed to bring together, stands out with an originality that in a series of highly creative has brought it to the attention of projects, the best of both of his international jazz critics. This is worlds – his Romanian musical how Time Out NY comments on roots and the vibrant US and the group’s work: “… Like Wayne European contemporary modern Shorter, McCoy Tyner and other vanguard bandleaders of that era, jazz scene. A pianist and a composer, Ban the Romanian born pianist-comis also the leader of super group poser Lucian Ban alongside inElevation, with whom he will per- tense saxophonist Abraham Burform this month in Bucharest as ton, bassist Brad Jones and drum-
∫ ANCA IONITA
FOUNDING EDITOR Bill Avery PUBLISHER Anca Ionita EDITOR-IN-CHIEF Simona Fodor JOURNALISTS Otilia Haraga - senior journalist, Simona Bazavan, Ovidiu Posirca, Oana Vasiliu COPY EDITOR Debbie Stowe PHOTO EDITOR: Mihai Constantineanu
ISSN No. 1453 - 729X
LAYOUT Beatrice Gheorghiu ART DIRECTOR Alexandru Oriean
2013 “Mystery” by Lucian Ban & Elevation / Sunnyside Records – new release 2013 “Transylvanian Concerts” by Lucian Ban & Mat Maneri / ECM Records – new release 2010 “ Enesco Re-Imagined” by Lucian Ban & John Hebert – featuring Tony Malaby, Ralph Alessi, Mat Maneri, Albrecht Maurer, Gerald Cleaver, Badal Roy, John Hebert / Sunnyside Records 2010 2008 “The Romanian-American Jazz Suite” by Sam Newsome & Lucian Ban Ensemble – featuring Sam Newsome (sop sax), Arthur Balogh (bass), Willard Dyson (drums) Sorin Romanescu (guitar), Alex Harding (bari sax), Lucian Ban (piano) / Jazzaway Records 2008 2006 “Playground” by Lucian Ban & ASYMMETRY – featuring Jorge Sylvester (alto sax), Brad Jones (bass), Derrek Phillips (drums), Lucian Ban (piano) / Jazzaway Records 2006 2006 “The Calling” by Alex Harding & BLUTOPIA – featuring Alex Harding (bari sax), Nasheet Waits (drums), Lucian Ban (piano), Brad Jones (bass), Andrew Daniels (p) / Jazzaway Records 2006 2005 “Tuba Project” by Lucian Ban & Alex Harding / Cimp Records 2005
mer Nasheet Waits favor searching post bop that cranes toward the avant-garde without losing the buoyancy of swing.” The group’s stage persona is the result of the powerful combination of big names from the New York jazz scene brought together by Ban, such as the saxophonist Abraham Burton, who has been described by the New York Times as having “…flames coming out of his saxophone”, his solos being labeled “powerful and creative”, by the same publication. The blending substance between the different personalities of the musicians in the Elevation quartet is given by the “wideranging musical interests and a passion for improvisation” of Ban,
whose playing has “the elegance and technical precision of the European classical tradition,” according to critic Jeff Stockton (All About Jazz). Ban has recorded more than seven albums as a leader for labels in US and Europe, including Enesco Re-Imagined (2010) and The Romanian-American Jazz Suite (2008). Both of the albums have enjoyed public and critic international success due to the original re-interpretation by international jazz musicians of Romanian classical and folk music, with Ban acting both as a catalyst-composer and a performer.
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