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FOCUS: Romania is set to bring in new taxes next year to fill the state coffers, with finance minister Daniel Chitoiu attributing this year’s fall in budget revenues to the modernization of the fiscal authority ANAF »page 10


November 11 - 17, 2013 / VOLUME 17, NUMBER 36

Romania passed the Electronic Sports World Cup organization test with flying colors, with the turnout at last week’s event exceeding expectations » page 8

Photo: Otilia Haraga


Center of business


Bucharest’s old center has seen an economic revival over recent years and expectations from both the public and private sector are only growing

» page 12 Business Review | November 11 - 17, 2013


NEWS in brief

3Q Emilian Dobrescu

general director of Agrana Bg & Ro and president of the Romanian Sugar Association

BANKING EximBank nine-month gross profit soars on higher lending

Banca Romaneasca, part of the National Bank of Greece (NBG) group, announced last Monday it granted a RON 5.8 million (EUR 1.3 million) loan to SC ETA SA, the local transport company in the municipality of Ramnicu Valcea. The firm used the financing to acquire eight new buses in a bid to improve the city’s public transport infrastructure. Cosmin Calin, executive director of the corporate unit at Banca Romaneasca, said the lender had won the tender organized this May by ETA, after submitting the best offer. The sole shareholder in ETA is the local council in Ramnicu Valcea.

HEALTHCARE Informal health payments highest for surgery The highest level of informal medical payments, hovering at an average of RON 608 (EUR 136), is found in the general surgery field, according to a new study that gauges the payments made by Romanian patients seeking treatment in both public and private healthcare institutions. The study by Exact Cercetare si Consultanta and Link Resources, a healthcare consultancy, which was commissioned by the Aspen Institute Romania, found that nurses are the biggest recipients of informal payments or gifts, followed by obstetricians and resident physicians. Patients make lower informal payments for medical tests or checkups.

Pet rescue: Animal lovers urged to adopt dogs before deadline The Bucharest City Hall is running a billboard campaign urging members of the public to adopt stray dogs from public shelters. Those interested can adopt from the Mihailesti and Pallady shelters, from Monday to Friday between 10 am and 3 pm. One dog may be adopted free of charge, while taking a second will cost RON 150. The law stipulates that stray dogs in public shelters be euthanized if not adopted within 14 working days.

INVESTMENTS Arctic to invest EUR 24 million in Gaesti plant through to 2018 Electronic appliances producer Arctic, part of Turkish Arçelik Goup, will roll out a EUR 23.9 million investment program over the next five years to increase its production capacity in Gaesti, according to company officials. Arctic accessed EUR 10.2 million in state aid to support the investment, which will create 572 new jobs. The new production line became operational in October and generated 195 jobs in the first stage. The company currently employs 2,500 people in Romania. According to Levent Çakıroğlu, president of Koç Holding and CEO of Arçelik Group, Arctic is the largest producer of refrigerators in Europe, with a yearly output of 2.5 million units. The company posted a 10 percent rise in turnover to EUR 222 million in the first nine months of the year.

MEDIA CME plans to lay off 1,000 employees by yearend Central European Media Enterprises (CME), the mother company of the Pro TV stations in Romania, plans to make 1,000 employees redundant by the end of the year. The media group also said

it is in the process of reviewing its “non-core businesses,” after posting poor Q3 results, according to

This would result in roughly USD 30 million (EUR 22 million) in annual savings, but also in a largerthan-anticipated restructuring cost of USD 20 million this year, as well as severance costs of approximately USD 7 million in total for the third and fourth quarters, writes

PHARMA Local pharma market gains 1.8 percent to EUR 1.9 bln The local pharmaceuticals market grew by 1.8 percent to EUR 1.9 billion in the first nine months of the year, driven by higher sales in the first two quarters, according to a new report by Cegedim, a data provider for the pharmaceuticals industry. In the third quarter, the market fell by 1.6 percent to EUR 627.6 million, due to lower sales of prescription-based medicines in pharmacies and an 8.2 percent reduction in the hospital segment. Cegedim suggested that the market had lost steam due to insufficient public financing for healthcare, which in turn means that only some patients are getting access to adequate treatment.

Photo: Mihai Constantineanu

Banca Romaneasca grants EUR 1.3 mln loan to local transport company

IMAGE of the week

Photo: Mihai Constantineanu

EximBank, the local export-import bank, said last Monday it had posted a 28 percent expansion in gross profit in the first nine months of the year, while its loan book had soared 40 percent to RON 1.5 billion (EUR 338 million). Traian Halalai, the EximBank president, said the lender’s exposure to the economy had climbed to RON 4.4 billion (EUR 992 million) by September, up more than threefold from 2009. He added that the lender had opened four new branches this year, and was planning to take the national network to 20 next year. EximBank has reorganized its client support department as part of its efforts to optimize the administration framework.

How much sugar is sold in Romania each year and how much comes from domestic production? Internal consumption amounts to about 500,000 tonnes. Multiply this by roughly EUR 700 per tonne and you get the market value, VAT not included. Locally we produce about 100,000 tonnes of sugar from sugar beet. An average of about 300,000 tonnes is produced from imported raw sugar which is refined locally. The remaining 100,000 is intra-community trade, which is a known source of tax evasion in this industry. How much does the black market represent? We have unambiguous statistics that prove the black market exists and represents about one fifth of sold volumes. If we add internal production and raw sugar imports, which are thoroughly monitored, and subtract this from the domestic consumption which as I said is estimated at 500,000 tonnes, the remaining fifth is the black market. For example, there are clear discrepancies between the data related to trade with sugar between Romania and neighboring countries such as Bulgaria and Hungary (…) There are ways to address the issue of tax evasion in industry, starting with lower VAT and perhaps reversed taxation, but also stricter inspections. How many sugar producers are there in Romania? There are six large sugar companies in Romania at present. Four companies produce sugar from locally grown sugar beet, which is produced under quotas. The rest refine raw sugar. In addition to this, there are other smaller producers but they don’t have constant activity. Back in 1990 there were 33 sugar companies in the country but not all of them were viable. What we have today pretty much meets the needs of the local market. There is room for consolidation and I expect this will happen after 2017. Business Review | November 11 - 17, 2013


Local farmers need 5,000 new tractors a year to boost average yields


Photo: Mihai Constantineanu

omanian farmers must invest significantly in agricultural equipment if the sector is to fulfill its potential, according to an industry representative. Between 1,800 and 1,900 new tractors will be sold in Romania this year, up from about 1,700 in 2012, estimates George Stanson, business manager at Case IH&Steyer Balkans. Both the rate of increase and volume are low compared to the country’s needs and potential, he told BR. “The Poles bought 17,500 new tractors this year. It is true that their farmland surface is more than twice Romania’s, but even so, the difference is considerable,” he said. Romania must buy about 5,000 new tractors each year to post higher average yields, added Stanson. If the National Program for Rural Development (NPRD) for 2014-2020 is better attuned to local farmers’ investment needs and better implemented, tractor sales should rise to 5,000 by 2017, the impact of which would be felt throughout the entire economy. “There is some good news. The fact that the authorities have decided to reduce the number of measures in future NPRDs to 13 from 24 over 20072013 is welcome. They also need to make the evaluation process shorter,” he added. Stanson estimates that 100,000150,000 farmers still plough with obsolete tractors. Investments in technological upgrades are vital to improve productivity. The average wheat yield in Romania is around 3 tonnes per hectare, said Achim Irimescu, secretary of state at the Ministry of Agriculture and Rural

George Stanson, business manager at Case IH&Steyer Balkans

Development, at the fourth BR Focus on Agriculture event. By investing in the right ploughing equipment alone, a farmer should be able to increase average yields from 3t/ha to around 4.5-5t/ha, said Stanson. “If Romania manages to increase the amount of high-performance farming equipment a farmer has in his or her backyard, then we will definitely be on the right track,” he added. A recent BCR report found the average Romanian farm owns four pieces of agricultural equipment such as tractors and harvesters, compared to 44 in Poland and 120 in France. In 2012, Romania was the fifth largest wheat producer in the EU by surface and output, but reported the lowest yield, according to the National Institute of Statistics. ∫ Simona Bazavan


PwC survey finds firms support ANAF reorganization


he reorganization of tax collection department ANAF has been welcomed by managers, who say the agency should focus on combating tax evasion and expanding its IT infrastructure to improve its relations with taxpayers. In a survey by professional services firm PwC Romania, published last week, 40 percent of polled companies said the reorganization of ANAF was absolutely necessary, while 48 percent of respondents agreed the initiative was necessary but said it needed adjustment. The PwC survey was based on the answers of more than 30 financial managers of large Romanian companies, who were questioned between October and November 2013. “The Romanian business environment understands the need for ANAF to re-

organize in such a way as to help improve tax collection, combat tax evasion and be more responsive to the needs of honest taxpayers,” said Mihaela Mitroi, tax and legal services leader at PwC Romania. ANAF kicked off a modernization program earlier this year, with support from the World Bank, seeking to streamline its activity and cut costs. According to Octavian Deaconu, general secretary at the agency, it is aiming to complete an integrated IT system to enhance efficiency and limit human intervention by 2018. This month ANAF will launch a new anti-fraud division, granted more firepower to investigate tax evasion cases. Its inspectors will work closely with prosecutors on complex investigations. ∫ Ovidiu Posirca Business Review | November 11 - 17, 2013



Insolvency law fiasco unnerves investor community With the new insolvency code rejected on the grounds that it was unconstitutional, business groups are seeking a greater role in shaping future bills. Business associations said last week the new insolvency code was the latest in a series of major legislative changes passed by authorities without proper consultation, providing limited time to submit amendments. “It’s extremely important that we have a predictable process for legal changes, to have changes in a strategic context and with an assessment study,” said Steven van Groningen, vice-president of the Foreign Investors’ Council (FIC), the business advocacy group, during a roundtable on insolvency organized last week. He was joined by the heads of AmCham Romania, Romanian Business Leaders (RBL) and the Association of Romanian Businesspeople (AOAR). The FIC vice-president described as “incredible” Romania’s track record in passing around 100 government emergency ordinances yearly, some of them including key bills that impact the overall business environment. Such is the case with the new insolvency code, which was approved last month through a government emergency ordinance, with PM Victor Ponta arguing that it was part of a wider effort to combat tax evasion. In the meantime, the code was rejected by the Constitutional Court on many grounds, including its retroactive effect. At present, insolvency procedures are being carried out under the old legislation, which business associations say needs a major overhaul. “The (e.n. current) insolvency law is very bad, allowing those that want to cheat to make a mockery of creditors,” said Florin Pogonaru, the AOAR president. Pogonaru commented that insol-

“The (e.n. current) insolvency law is very bad, allowing those that want to cheat to make a mockery of creditors” Florin Pogonaru, the AOAR president

vency procedures in which stateowned entities are creditors are prolonged because the state wants to fully recover its receivables. He added that the increased length of insolvency procedures drives up costs and that the reorganization of companies is not supported. According to Arin Stanescu, president of the National Union of Insolvency Practitioners (UNPIR), over 94 percent of insolvency procedures are heading towards bankruptcy, while 6 percent are reorganizations. At present, there are some 20,000 ongoing insolvency procedures, against an overall number of companies registered in Romania which stands at 700,000. Mihai Marcu, president of the RBL, added that commercial creditors do not recover any receivables under the current law. He mentioned situations where the insolvency practitioner gained more than the creditors. BR asked Stanescu to comment on the allegation regarding the inflated gains of insolvency practitioners. He said this was not the case as the overall market gains of insolvency practitioners stand at EUR 20 million yearly, on recovered sums of EUR 521 million. Representatives of the business community expressed their disappointment at the limited dialogue with authorities over the new code. They say the private sector should have had a bigger say on the insolvency legislation. Nonetheless, business associations said they were ready to submit amendments for a new insolvency bill. The new insolvency law was backed by a EUR 338,000 World Bank loan and was drawn up by specialists from insolvency and professional services firms, with contributions from experts at the Ministry of Justice. Stanescu, who was a key architect of the new insolvency code, said the National Bank of Romania, along with the association of Romanian banks and that of insurers were constant attendees at work meetings.

Business associations make raft of recommendations The business environment has not given up following the failure of the insolvency code, and has put out a series of recommendations designed to improve legislation in this field.

This includes the setting up of specialized courts prior to the approval of new insolvency legislation. In order to streamline procedures, more highly trained judges are required. Valeriu Nistor, AmCham president, says that at present, some bankruptcy judges have to work on 100 cases daily. The president added that the business community seeks “greater precision” in the recovery of receivables, meaning they should have a say after the reorganization plan is passed. “Collectively, the business environment has the chance to draw up an insolvency law to protect economic value created over time and make people seriously consider whether to file for bankruptcy or restructure,” said Nistor. ∫ Ovidiu Posirca

WEEK in numbers

USD 34.7 mln is the third quarter revenues of internet, telephony and TV provider UPC Romania, part of Liberty Global. It marks an 11.3 percent increase on the same period of 2012. UPC currently has a customer base of 1,160,300, up by 6,600 on the third quarter of 2012

EUR 84 mln is the value of real estate transactions in Romania in the first nine months of the year, according to a CBRE report quoted by Mediafax. Alongside Ukraine, Romania is one of the only countries in the region to see falling real estate transaction values, down 51 percent yo-y. Neighboring Bulgaria reported transactions worth EUR 27 million, three times higher than the same period of the previous year Business Review | November 11 - 17, 2013


Agribusiness investors urge authorities to step up to the plate with new NPRD Fighting tax evasion, cheaper bank loans, support schemes for local producers and better adapting the future National Program for Rural Development (NPRD) to the needs of the local agribusiness sector were some of the most important topics discussed during BR’s fourth Focus on Agriculture event, held during the INDAGRA farming trade fair. ∫ SIMONA BAZAVAN

2,000 Romanian products could benefit from the EU’s specific quality schemes compared to only one product at present – Magiun Topoloveni

All photos: Mihai Constantineanu/ Vlad Virban

A lack of vision in the way Romanian authorities chose to use the EU money available for agriculture between 2007 and 2013 considerably slowed down the development of the local agribusiness sector, complained participants at the event. With a new NPRD for the 2014-2020 period coming into force next year, it is once and for all time to learn from past mistakes and move towards concrete development plans, they urged. The future NPRD must offer local farmers investment opportunities better targeted at the realities of the local agribusiness sector, said participants. Proof that up until now the Romanian authorities have been more concerned about EU funds absorption rates than the way the money is being spent is the fact that local sales for agricultural equipment have been growing at an annual rate of some 5 percent per year, well below potential and the needs of local farmers. “In Romania only about 1,800 new tractors will be sold this year while in Poland some 17,000 will be sold. Access to quality inputs is not enough to provide quality products. For this one needs to invest. If Romania manages to increase the amount of high-performance farming equipment a farmer has in his or her backyard, then we will definitely be on the right track,” said George Stanson, business manager at Case IH&Steyer Balkans. Shortcomings in the way EU funds were spent over 2007-2013 are also evident in local farmers’ poor access to financing. Subsidies for small family farmers should have gone up significantly given the EU funds these farms were allocated, but this has failed to happen, said Adrian Raducan, department manager in the structural funds department, corporate products and know-how management area, corporate business division at Raiffeisen Bank.


1. During the debates, participants raised specific issues they had faced in the process of accessing EU funds A clear development strategy with specific targets and the means to reach them would finally provide the right conditions to deal with deep-rooted problems like low productivity and competitiveness, concluded participants.

The latest from the authorities Romania is currently in the process of drafting its NPRD for 2014-2020 and a final version will be sent to the European Commission by January 2014, agriculture minister Daniel Constantin has previously stated. The future NPRD could come into force in the second half of 2014. Present at the event, Achim Irimescu, secretary of state at the Ministry of Agriculture and Rural Development (MADR), revealed some of the latest developments in the drafting of the NPRD. He revealed that the scheme for 2014-2020 will feature a special sub-sectorial restructuring program dedicated to investments in orchards which will be allocated EUR 200 million of EU funds. Local authorities said earlier this year that Romania was planning to include three sub-sectorial restructuring programs – for orchards, mountain areas and milk producers – in its forthcoming rural development program. The secretary of state suggested that most likely only one program, the one for orchards, will be included in the NPRD for 2014-2020. Another recent development is that

the authorities are considering lowering the maximum EU grant young farmers can receive to set up a farm in rural areas from the initially proposed EUR 70,000 to EUR 50,000. This is intended to allow a greater number of farmers access to the grant, explained Irimescu. During the debates, participants raised specific issues they had faced in the process of accessing EU funds and complained that APDRP public workers often act like police officers, more concerned with exposing irregularities than with helping applicants. Nicolae Popa, deputy general director of the Agency for Payments for Rural Development and Fishing (APDRP), admitted that the evaluation of projects submitted for EU funding over 2007-2013 “wasn’t the best” and said that there are plans to simplify procedures, reduce bureaucracy and cut red tape during the coming financial period. He revealed that up until now some projects have taken more than a year for APDRP workers to evaluate. Understaffing is a problem, he said, but so is the performance of some of agency’s employees.

Stamping out tax evasion An important topic during the debates was tax evasion on foodstuffs. Referring to the recent investigation led by the Romanian authorities into a EUR 50 million tax evasion case involving food products, Stefan Padure, executive director of the Romanian Meat Associa-

tion (ARC), said that it was “the first time in 20 years when the authorities had addressed the issue in a thorough manner in order to help create a fair business environment”. This is the only way to ensure products on the market are safe and raise the money needed to counterbalance the VAT cut, he added. From the second half of 2014, VAT on meat and meat products could be reduced from 24 percent to 9 percent, as was done for bread products, said Padure. Elsewhere, on the sugar market, tax evasion engulfs about one fifth of sold volumes, said Emilian Dobrescu, general director of Agrana Bg & Ro and president of the Romanian Sugar Association. The black market for sugar is mostly fuelled by intra-community trade, he explained. Addressing the issue of tax evasion becomes even more pressing considering that from 2017 the EU will drop the production quotas which regulate the sugar market at present. This will mean additional competition for the local sugar industry, stressed Dobrescu. Cutting the VAT for sugar and reversed taxation would help reduce the phenomenon alongside more effective oversight from the authorities, he recommended.

A plea for quality Romania’s joining the EU has brought about opportunities for local producers to reach their potential but means they are operating on a highly competitive Business Review | November 11 - 17, 2013


7 2

1. Representatives of the authorities were called upon to come up with a better adapted NPRD 2. Pundits at the event urged industry players to make full use of the tools offered by the EU market. Whereas European farmers and producers are making good use of the tools and support schemes that EU membership offers them, local producers have yet to follow suit. “We have been EU members since 2007 and are not yet using all the tools that the EU offers producers. (…) We don’t have to reinvent the wheel; we only have to learn from the experience of our European counterparts,” said Padure. “Because we are lagging well behind others we have to follow in their steps. This can be an advantage. We can adopt know-how, technologies – everything we need,” added Camelia Sucu, local entrepreneur and owner of the Abundia wholesale market for agricultural products.

Some of these untapped resources and a national contribution – for the are the EU’s specific quality schemes promotion of products certified as trawhich enable farmers and producers to ditional. We received the funds for the build on high-quality reputations to sus- plum jam, the Greeks for their cheese,” tain competitiveness and profitability. said Bibiana Stanciulov, the company’s Sonimpex, the company that produces GM and owner. Some 4,400 Romanian products the Topoloveni magiun (Romanian for plum jam), is the only Romanian pro- have been certified as traditional producer to benefit from the funds available duce by the Ministry of Agriculture and Rural Development, she added. “I find through these schemes so far. In 2011, Topoloveni plum jam be- it very hard to believe that there aren’t came the first Romanian product to at least a few local businesspeople who make it onto the Register of Protected would consider investing in these prodDesignations of Origin (PDO) and Pro- ucts,” she commented. The support offered by the EU’s tected Geographical Indications (PGI). No others have yet joined it. “It is quality schemes is vital for the developvery sad that we are the only one. ment of local producers, said Padure. Alongside a Greek producer we received “Europe has realized that money is necEUR 4.5 million – made up of EU funds essary to support the growth of tradi-

tional and national products and the money is available through these schemes and is very easy to access. There is the potential for 2,000 Romanian products to be upgraded at EU level,” he added. Another measure that would support, promote and encourage local producers to come up with quality produce and foodstuffs is the introduction of labeling regulations that would make it mandatory to specify the origin of all ingredients a product contains. “I strongly believe that when traceability labeling is introduced (…) then we will solve the financing issue, tax evasion and much more,” said Stanciulov.

8 LINKS Business Review | November 11 - 17, 2013

Romania loading key position in global gaming league About 5,000 gaming fans descended on Bucharest’s Polivalenta Hall last week, when Romania hosted the Electronic Sports World Cup for the first time ever, after four years in a row with South Korea as host country. The Asian nation swept the board in all the men’s eSports competitions last week while also taking gold in one of two women’s finals, but Romania looks set to become a bigger player in the arena in the future. ∫ OTILIA HARAGA

All photos: Otilia Haraga

“I was actually expecting this to be a lot harder, but after the first matches, when I saw the other players, I became confident that I could win,” Swedish gamer Madeleine Leander, a.k.a. MaddeLisk, who grabbed the gold in the women’s Starcraft 2 final, told BR. “I was the most nervous about the Korean girl because she was so overhyped but when I saw her play, I knew I could beat her!” Leander, 27, is currently pursuing her PhD in mathematics, but apart from doing research and teaching at university, she also games for about 30 hours per week. “I had actually never played computer games before I started with Starcraft, and two or three years ago I barely used the computer. I started gaming with my friends – we used to play four against four while talking on Skype, and it was really fun. Then the female cups started, and my friends encouraged me to participate,” she told BR. Even though winning the Starcraft 2 final earned her EUR 2,000, Leander said that she was “definitely not in this for the money.” The latest eSports competition from which she came back with a prize was the University Star League, a tournament for university students in Sweden, and, of course, the qualifiers for the Electronic Sports World Cup hosted in Bucharest last week. This was South Korea’s year: in the ranking of nations, the Asian state came first, followed by Sweden and Russia. After organizing the Electronic Sports World Cup in South Korea for four years in a row, the International e-Sport Federation (IeSF) decided to appoint Romania host country for this year’s event, which took place over November 1-3 at the Polivalenta Hall in Bucharest. “We have had this in mind for some time. By having the world cup in Korea several times in a row, we could not meet the needs of all fans and players, so we wanted to bring the sport to the Europeans this time,” said Alex Lim, general manager of the International Relation Department of the IeSF, who was involved in the organization of the event for close to a month beforehand. South Korea also prevailed in the

Game on: attendance was above expectations at the Electronic Sports World Cup, which took place last week at the Polivalenta Hall in Bucharest Lim, of the IeSF, adds, “In South much-awaited final of League of Leg- games. All the top performances it has ends, where its team crushed the delivered were in individual competi- Korea, gamers have a lot of fans and Netherlands in two rounds out of tions,” Silviu Stroie, president of the they make a lot of money too. (…) three, to win EUR 20,000. The country Professional Gamers League in Roma- Many of these eSports teams live together in the same house. They get up also ran out winners of the Alliance of nia, tells BR. He adds that when it comes to very early in the morning, have breakValiant Arms (A.V. A.) game, when its Astrick team defeated Thailand, earn- team sports, it is more complicated fast and start playing games. They because players need to be “serious, have coaches, most of whom are foring EUR 13,000. In the women’s competition, South patient and united”. “You also need mer players, and also have personal Korea was also well represented by Yi five people who are on the same trainers, because they work out. They Sub Yang, who won the Tekken wavelength and who get along very need to be in good shape so that they can withstand the pressure of the Tag Tournament 2 against her Russian well,” he says. Stroie adds that in Europe, the tournament. Typically, they might opponent, and nabbed a EUR 2,000 Na’Vi team from Ukraine and Fnatik play for up to 12 hours a day so they prize. Romania did not make it into team from England are the best teams. need to be in condition to win the the top three in any of the competi- “Na’vi was the first team from the game.” He explains that in South tions. However, gaming is gaining in Western hemisphere to win a USD 1 popularity here as well, slowly but million prize during a competition Korea, gamers do this for a living surely, Romanian League of Legends two years ago,” says the representative. and team members are paid monthly Still, with Stroie having been ap- salaries. gamer Ovidiu Stoian, a.k.a Cliqque, Just like in conventional sports, pointed, just last week, vice-president tells BR. Stoian, 18, has been playing for the of the IeSF - being the first European players will retire at some point. “I past two and a half years but wants to ever to make the IeSF management – think this is because all these games apply to the Military Academy. “I Romania stands a good chance of suc- are related to technology trends and younger people are more familiar with started playing League of Legends be- cess going forward. But for this to happen, there is also new technology,” explains Lim. cause it is a team game; I’m not really In fact, pretty soon, the borders beinto individual games. You have to be a need for a change in focus and mentween conventional sports and eSvery sharp all the time, because any- tality. For instance, Korean League of ports will become even more blurred. thing can change the game,” he says. Oddly enough, Romania is not well Legends player Sang Hyun Lee, 23, “As the Korean eSports Association represented in any team competition, who studies Mathematics Education (KeSPA) is getting recognized by the whether in conventional sports or eS- at Korea University, tells BR, “Training sports authority probably next year, ports. “Generally, in any sport, Roma- hard is important. We play nine or ten gamers will be called ‘athletes’ instead of ‘players,’” Lim told BR. nia does not do very well in team hours each day.” Business Review | November 11 - 17, 2013

Silviu Stroie, president of the Professional Gamers League

Ovidiu Stoian a.k.a Cliqque, Romanian League of Legends gamer

Swedish Madeleine Leander a.k.a. MaddeLisk, Starcraft 2 final winner

Sang Hyun Lee, member of the winning South Korean League of Legends team

Next level: Romania may host Electronic Sports European Cup The eSports World Cup in Bucharest gathered about 5,000 visitors, a very good attendance rate even by South Korean standards. “In Korea, there are many such events going on: both events organized by the IeSF, and those organized by the Korean eSports Association,” says Stroie. At the moment, there are ongoing negotiations with the Romanian government to host the Electronic Sports European Cup in Romania as well. “Maybe by the end of this year, we will be able to make this announcement officially,” Lim tells BR. This year was the very first time gamers had had to take anti-doping tests, a practice which will continue in future years. “They were tested for exactly the same substances that are tested for in any sports event,” says Stroie. The anti-doping tests were carried out by the Bucharest Anti-Doping Agency and the results will come back in two weeks. The IeSF is now affiliated to the World Anti-Doping Agency, since it applied to be affiliated to Sport Accord

(the International Federations’ Union) (ed. note: the union for both Olympic and non-Olympic international sports), which will be voted upon in April 2014. “We are trying as a federation to follow all the norms applied to any regular sports events, by organizing competitions for men and women, carrying out anti-doping tests, and so on,” Stroie tells BR. As a future priority of the IeSF, of which Stroie is now vice-president, eSports may make it onto the list of the European Olympic Games organized by the European Olympic Committee, due to take place in Azerbaijan in June 2015. “We are very close to an official announcement that eSports will become an official discipline in the European Olympic Games. The Romanian Olympic Sports Committee is taking part in the event and most likely, we will have Romanian eSports players there,” says Stroie. This information is confirmed by Lim, who adds that the federation “needs to be able to send technical delegates to make preparations for the event.”

LINKS 9 Business Review | November 11 - 17, 2013


Romania seeks to mend leaking budget With a EUR 653 million shortfall in revenues following the second budget revision, the government has put forward a raft of tax proposals applicable from 2014, in a bid to fill the state coffers. Experts outlined to BR short-term fiscal measures that could boost revenues without increasing the tax burden.

Failures in tax collection Daniel Chitoiu, finance minister, said in late October that the revision, which was vetted by international lenders, was “not pessimistic, but realistic”. Chitoiu commented that the state’s tax take was down by 0.2 percent of GDP by October, and the government plans to take 33.8 percent of GDP in taxes this year, still below the EU average. He added that he believes Romania should collect more in taxes, and if it fails to do so, he will take drastic measures against those who did a poor job. “Certainly, a negative revision was inevitable, because, as we warned during the previous revision, most of the revenue estimations were rather unrealistic,” said Ionut Dumitru, president of the Fiscal Council, a think tank, quoted by Agerpres newswire. He added that the negative revision involved the reduction of expenses, partly through the increase in the budget deficit. The government agreed last week with the IMF and the European Commission to hike the budget deficit from 2.3 to 2.5 percent of GDP this year, expressed in cash terms. Romanian

Courtesy of Dobrinescu Dobrev


Courtesy of PwC Romania

Courtesy of Musat&Asociatii

Ionut Bohalteanu, partner, Musat & Asociatii

Mihaela Mitroi, tax and legal services leader, PwC Romania

Daniel Chitoiu, minister, Ministry of Public Finance

Luisiana Dobrinescu, partner, Dobrinescu Dobrev

officials said more funding would be funneled towards the co-financing of EU funds. “I hope to meet and even exceed our budgetary targets in the fourth quarter,” said Chitoiu. The minister is pinning his hopes on a fiscal package worth RON 3 billion (EUR 675 million), which bundled a new tax on the profits of utilities and energy companies benefiting from the liberalization of gas prices with the expansion of the tax base in the agriculture sector. The authorities were able to collect only 25 to 30 percent of the EUR 52 million they expected to get from utility firms this year, with Chitoiu suggesting that more money will go into the state coffers this winter, when gas consumption will soar.

Take falls during ANAF reorganization

anti-tax fraud department this month, which will have closer ties with other enforcement authorities to recover losses from evasion. “The reorganization of ANAF cannot be the sole reason that the collection is below expectations. Another explanation could be the growing number of firms that are defaulting on their debts to the state, underpinning in part the high level of these taxes,” Ionut Bohalteanu, partner at law firm Musat & Asociatii, told BR. Aside from the ANAF reorganization, the tax take was also dented by the reduction of VAT on bread to nine percent and the enforcement of the VAT cash collection system, suggested Dobrinescu. ANAF announced last month that it had collected 7.3 percent more in revenues in October than during the same period of last year, at RON 1.1 billion (EUR 247 million).

The finance minister pinned the blame for the fall in tax revenues on the reorganization of the tax administration arm ANAF, adding that the authorities will have greater firepower in tackling tax evasion from next year. “ANAF and the political machinations behind this institution are responsible for the poor collection capacity, because there are certain categories of taxpayers that do not face a single inspection, not even once every five years, and these are not corner shops but businesses with millions of RON in turnover,” Luisiana Dobrinescu, partner at law firm Dobrinescu Dobrev, told BR. The government will launch a new

“ANAF and the political machinations behind this institution are responsible for the poor collection capacity, because there are certain categories of taxpayers that do not face a single inspection, not even once every five years, and these are not corner shops but businesses with millions of RON in turnover,” Luisiana Dobrinescu, partner at law firm Dobrinescu Dobrev

Short-term solutions for higher collection Earlier this year, Romania borrowed more than EUR 70 million from the World Bank in an effort to fix the tax collection system and improve its image among taxpayers. The main sources of Romania’s fiscal woes that need to be addressed are the legal instability, unclear legislation and poor fiscal administration, suggests Dobrinescu of Dobrinescu Do- Business Review | November 11 - 17, 2013 brev. “Unfortunately, the pool of good taxpayers is getting smaller and cannot cope with another increase in taxes, to cover the growing tax evasion hole,” said Dobrinescu. Mihaela Mitroi, partner, tax and legal services leader at the professional services firm PwC Romania, says the fiscal authorities should concentrate more on investigating the areas that are particularly vulnerable to tax evasion. “In recent years, ANAF has been moving in a vicious circle where inspectors are largely blocked by solving VAT refund requests, which is detrimental to the more visible combating of tax evasion,” Mitroi told BR. However, she adds that although 70 percent of inspectors issue VAT refunds, this is the area where Romania performs poorly. A study by the European Commission, the executive arm of the EU, found that Romania collected only 58 percent of the VAT due in the 20012011 period. The PwC partner calls on the authorities to amend the VAT legislation so as to reduce the number of companies seeking a VAT refund. She suggested the reverse charge be reintroduced for the delivery of new constructions. The same mechanism should also be applied to VAT due at customs. In addition, the implementation of the VAT group would free transactions made between members of a group from VAT. Another avenue that could boost tax collection would be the implementation of electronic tax returns, whose usage is growing at an EU level.

33.8% of GDP – tax collection target for 2013 For instance, in Luxemburg and Germany, the tax authorities ask companies to submit predefined forms containing relevant fiscal information to streamline the inspection process. Mitroi says this option is included in Romania’s Fiscal Procedure Code, but it has rarely been seen in practice.

Flat tax rate not enough for investors The future of Romania’s flat corporate tax of 16 percent was on the line last month, after suggestions PM Victor Ponta replace it with a progressive taxation system of 16, 18 and 20 percent. However, he backed down after a swift reaction from his party’s coalition partner, the National Liberal Party. PNL finance minister Daniel Chitoiu said his party would break the USL ruling coalition if the flat tax were to be changed. Although experts agree the flat taxation system has allowed Romania to maintain its competitive edge and

Result of second revision in 2013 budget Total revenues down RON 2.9 bln Total expenditure down RON 1.4 bln

Source: Ministry of Public Finance perform well in the race for foreign investments, the country needs to address other fiscal areas to enhance investors’ confidence. “In the context of the overwhelming taxation of wages and the unfair competition generated by the informal labor market and other types of evasion, the 16 percent rate is insufficient,” argued Dobrinescu of Dobrinescu Dobrev.

New taxes in 2014 Last week, the government announced plans to bring in new taxes in next year’s budget to support infrastructure investments and hike public sector wages and pensions. The new tax initiatives were agreed with a joint mission of the IMF, World Bank and European Commission which last week completed its first review mission under a EUR 4 billion precautionary deal. “The revenues were weaker, and next year there will be additional expenditure for wages, pensions and other investments, so, clearly, to cover these costs you need to prioritize them,” said Andrea Schaechter, head of the IMF mission in Romania, quoted by Mediafax newswire The authorities want to tax utilities and energy companies operating specialized constructions such as grids and offshore platforms, although the amount they will have to pay was still under discussion. Every liter of diesel of gasoline will include a new EUR 0.7 excise in the final sale price, while all excises will be pegged to the inflation rate. PM Victor Ponta defended the new fuel excises, saying the revenues would be funneled into a new fund designed to support the development of new road infrastructure projects. Royalties for all mineral resources will be hiked by 25 percent. This will not apply to the oil and gas sector, where the government plans to change the royalties regime next year. The state is aiming to increase the minimum wage by 12.5 percent to RON 900 (EUR 202) next year, and is considering a 5 percent cut in social security contributions paid by employers. However, the PM cautioned that the cut will be made in July 2014, only if the budget is able to cover it. Romania will build next year’s budget on a deficit of 2.2 percent of GDP, down from 2.5 percent this year. Economic growth is expected to stand at 2.2 percent next year, the same as this year. ovidiu.posirca

FOCUS 11 Business Review | November 11 - 17, 2013


How new can Bucharest’s Old City get? In the past year, the authorities have completed the refurbishment of Bucharest’s historic core, the Old City, turning it into a walkable quarter with distractions to keep you occupied by day and enough bars and clubs to ensure you don’t go to sleep early. Maintaining and improving the Old City is still a challenge for both the public and private sector, but expectations are rising from the network of small streets that host bars, restaurants and commercial spaces. BR found out what’s next for the businesses in the Lipscani area. OANA VASILIU

Courtesy of Re:public

Between 2007 and 2011, the Old City was effectively a no-go zone, with minimal street lighting and gaping holes in the pavements, papered over by unstable plywood bridges. But now specialists from the real estate company Colliers International claim in a new study that in two-three years the zone will be a commercial one. The trend has been started by Swedish company H&M, which has chosen the area for its first local highstreet location, a total surface of 1,500 sqm that will also include the H&M Home collection. This is a first for H&M on the Romanian market, where so far only the retailer’s clothes collections have been on sale. In 2010, there were around 80 pubs in the historical center. By 2011, an analysis of the market put the figure at 110. A year later, in 2012, the number was estimated to have grown by 36 percent, though this year it returned to the 2011 level, according to Ziarul Financiar. Currently, Bucharest’s Old Town covers an area of 57 hectares, of which Lipscani Street occupies about 15 hectares. A total of 527 buildings – of which about one third are clustered in the Lipscani area – occupy the space delineated by six major roads: Regina Elisabeta and Carol Boulevards to the north, Hristo Botev Boulevard to the east, Calea Victoriei to the west and Splaiul Independentei and Coposu Boulevard to the south. Half of these buildings were built before 1900, and the other half before 1940. Despite the rumors, owners of pubs in the neighborhood said that the City Hall is making efforts to help them obtain authorizations for the consolidation of the buildings and even to speed up the process. In July, a wall connecting two derelict buildings in Bucharest’s Old Town collapsed, though fortunately no one was hurt, as a police team had managed to close the street just before the wall fell. This came soon after another building gave way in the Old Town in May, again with no casualties. The remains of that building are still to be found on the street, and the area has been secured with police yellow tape. After the incident, Bucharest mayor Sorin Oprescu said he would ask the prime minister to change the law to allow the authorities to expropriate

New kid on the block: RE:public opened with a EUR 1 million investment buildings that are left derelict and which could present a danger to the public. Many other structures in the Old Town are in a similar condition, despite the recent improvements in the area, which has become the number one restaurant and nightlife hub in Bucharest. Since the demolition of historic buildings is not allowed, owners prefer to let structures fall apart by themselves, before building something else on the land. Lipscani currently hosts 51 buildings that contain commercial premises within an area of about 19,000 square meters, but 11 of them require serious investment in renovation or rebuilding, according to the Colliers study. Among the brands that have stores in malls, the Lipscani area is home to Adidas, Lash and Pente, and other national and international fashion retailers have said they intend to invest in the district. Rents in the area start at EUR 45-50 sqm/month for non-refurbished buildings and can reach EUR 70/sqm for renovated ones, while basements or upper floors can cost 30-70 percent less than ground floor premises, according to Colliers.

The cost of the facelift In his trilingual book on Lipscani, Eugen Istodor wrote of the main

street of the Old Center, “It looks like a theatre setting, ready for a party which is always postponed: vintage scenery, wedding dresses, easy drugs, easy lovers, cheap and colorful gifts, antiques, crazy bicycles, all sorts of tea, ecological, organic, shawarma/kebab, mussels, narghiles, eccentricities, cool, small talk, euphoria, parties, drunk men, funny, takeaways, pubs and taverns for all pockets, but also an earthquake waiting around the corner, ready to turn everything to dust.” This began to change this summer, when iconic inn Caru’ cu bere started the reconstruction of its façade, an investment estimated at EUR 1.5 million. Opened in 1879, this historic landmark is one of the few venues in Bucharest preserved as such, with architecture that reminds visitors why Bucharest was once dubbed the “little Paris”. Distinctive elements include the murals, stained glass and carved cross-beams. In 1879, the restaurant attracted international political and literary personalities such as Henry Wadsworth, I.L. Caragiale and Octavian Goga. Today, the restaurant serves about 2,000 customers per day, of whom 80 percent are foreigners. The location has 500 covers (indoor and outdoor) and finished last year with a turnover of EUR 6.5 million.

Between the old and unstable buildings of the Old City, a brand new one has sprung up on Selari Street, consisting of office space and two pubs, Academia de Biliard and RE:public. The investment in the beerhouse RE:public was EUR 1 million, according to Bebi Oprea, the operational and development director of Mundis Management Group. The location hosts two different leisure concepts, a brasserie on the grand floor and beerhouse in the basement, on almost 800 sqm. The capacity is 500 seats and 1,000 standing. “We all know that consumers who come to the Old City don’t spend too much money on food and beverages, but if you come with a concept that brings entertainment and high-quality products, then you can tap into a niche market. Here, we bring experience in beer, food and music – the band performs live every weekend,” Oprea told BR. Asked how the first weekend after the grand opening went, the manager responded that in two-three months the pub will reach maturity, as the first weekend brought in almost 300 clients, a very good start for a new business in the area. Business Review | November 11 - 17, 2013



Heli DEBBIE STOWE Director: Amat Escalante Starring: Armando Espitia, Andrea Vergara, Linda González, Juan Eduardo Palacios On at: Cinema City Cotroceni, Grand Cinema Digiplex, Hollywood Multiplex. Movieplex, Patria, Studio A pick-up truck trundles along a Mexican desert road bearing two bodies, one dead, one apparently not far off. Reaching a bridge, some young men get out, casually unload their human cargo, tie the corpse by the neck, tip it over the bridge and leave it dangling above the street. So ends the opening sequence of Heli – and this is by no means the most harrowing scene in the movie. Mexico’s drug wars have claimed tens of thousands of victims, dead and disappeared. Amat Escalante’s deeply disturbing film portrays the bloody impact of the conflict on one family. It is not for the fainthearted. Title character Heli (Armando Espitia) is an ordinary young man, prob-

Puppy love: Estela’s relationship plunges her family into a brutal nightmare in this harrowing Mexican film about the drug wars

ably not yet in his twenties. Like most of us, he is just trying to live a quiet and decent life with his family, his young wife (Linda González) and baby, apparently bereaved father (Ramón Álvarez) and rebellious younger sister Estela (Andrea Vergara). He has the usual mundane problems – some money worries, the stresses of parenthood and his sister’s unsuitable older boyfriend Beto (Juan Eduardo Palacios). But Heli’s previous troubles are as nothing when his family unwittingly gets on the wrong side of one of Mexico’s feuding drug cartels. The film is unflinching in its depic-

tion of the gang’s retribution. But what is even more shocking is the juxtaposition of brutality and banality, as the director makes the point that while what we are witnessing is extreme and horrific, it is also utterly commonplace, banal even, across Mexico’s drugs turf. Most of the men meting out the violence are not trained killers, but simple Joe Schmoes, tracksuit-clad schmucks who slaughter as if they were flipping burgers. In the film’s most gruesome sequence – and there is fierce competition for that title – gut-wrenching

torture is performed on the hapless victims in a family living room while three young boys play idly on a Wii – and are encouraged to join in the beatings – and a woman indifferently makes tea in the background. “What did this one do?” asks one boy. “Who knows?” comes the reply. Getting justice is a forlorn hope. In this bleak context, it is astonishing that the movie manages to find some humor, such as when Beto attempts to impress Estela with his muscles by turning her into a human dumbbell. It is also remarkable that the director manages to sound a note of optimism, that whatever suffering the characters have endured, their family bonds somehow survive. But it is not much to cling to amid the sickening impression the film leaves. Heli is an unforgettable work – much though you might wish to forget parts of it. It should be required viewing for anyone who purchases cocaine, laying bare the consequences that demand for narcotics has on communities in the supply country. Escalante tells his story calmly, with serene shots of the Mexican plains belying the carnage being wreaked in their undistinguished homes and outhouses. The use of non-professional actors adds to the verisimilitude of Heli’s journey into hell. Business Review | November 11 - 17, 2013





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Jan Thomsen

is the new general manager of Athenee Palace Hilton Bucharest. He is replacing Linda Griffin, who, after three years at the hotel’s helm, will leave Romania to continue her career as GM of Hilton London Kensington in the United Kingdom. Thomsen has over 27 years of professional experience in the hospitality industry. He has previously worked as GM at Hilton WestEnd in Budapest. His first general manager assignment was in Denmark, at Scandic Hotels. Thomsen has graduated from hospitality schools in Denmark, IMD in Switzerland and Cornell University in the US.

Eine Klein Nachtmusik: Israeli pianist Omer Klein will play an eclectic jazz set

November 13, 20.00 ArCuB Israeli pianist Omer Klein – dubbed by the media one of the most exciting and original musicians on the international scene – will perform an eclectic jazz show for a Bucharest audience.

Klein later moved to New York, where he has played the Blue Note and Carnegie Hall, among other venues. He has released four CDs to great acclaim: Duet (2007), Introducing Omer Klein (2008), the solo piano album Heart Beats (2009) and Rockets on the Balcony (2010), his first release on John Zorn’s celebrated record label, Tzadik.

Klein has collaborated with renowned artists such as John Zorn, Lee Konitz, Jeff Ballard, Joel Frahm, Omer Avital, Johnathan Blake, Israeli music icons including Yehudit Ravitz, Eviatar Banai and Rona Kenan, and many other big names.

The winner of numerous awards, including first prize at the Jazz Hoeilaart International Competition in Belgium, in 2011 Klein wrote the music for the play Lemon Tree, which was performed at the Schauspielhaus Theater in Düsseldorf.

Born in Israel in 1982, he began playing and composing music at the age of seven. As a teenager, Klein studied jazz at the famous Thelma Yellin High School of the Arts, and gave his first concert at 16. In 2005, he moved to the US, where he attended the prestigious New England Conservatory and was tutored by Grammywinning pianist Danilo Perez.

Tickets cost from RON 15.90 to RON 35 and can be bought online from and, as well as branches of Posta Romana (the Romanian Post), Inmedia and Germanos stores and Green Hours.


has joined Biris Goran as an associate in the litigation department. She previously chaired the litigation department of another Romanian law firm. Grecu has experience in all segments of commercial litigation before all courts, including debt recovery, labor, contractual disputes and corporate matters. She has also represented multinational clients in the prosecution of employees charged with financial crimes.

Ministry of Transport sacks Tarom board

The administration board of stateowned airline Tarom was dismissed last week following a clash with the company’s CEO, Christian Edouard Heinzmann, according to Mediafax newswire. The dismissed board members were: Dan Pascariu (president), Valentin Macec (VP) and members Ciprian Ladunca, Marius Ghenea and Dumitru Prunariu. Pascariu told Mediafax he was considering taking legal action against the ministry. The new board consists of: Dante Stein (counselor to the PM), Manuel Donescu (state secretary at the Ministry of Transport), Florin Luca (banking counselor), Bogdan Speteanu (general director at BCR Leasing) and Razvan Filipescu (president of the National Tourism Authority). The decision to dismiss the old

board was taken “because they broke the regulations” when they decided to cut Heinzmann’s term as CEO from an initial four years to one year, said ministry spokesperson Teodora Trandafir. Moreover, press statements made by some board members have “caused major damage to the company’s image”, she added. Tarom’s former board of administration had previously expressed dissatisfaction with the performance of the company’s CEO. As a result, at the end of June, Heinzmann and Dan Pascariu, the president of the airline’s administration board, agreed to reduce the CEO’s term to just one year. Tarom is the first local stateowned firm to which private sector management has been appointed, as part of the deal with the IMF.

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Business Review Issue 36/2013 November 11 - 17  
Business Review Issue 36/2013 November 11 - 17  

Romania passed the Electronic Sports World Cup organization test with flying colors, with the turnout at last week’s event exceeding expect...