Page 1

imf could propose minor changes to the stand-by agreement; see news on page 5 news



the european investment Bank (eiB)

many business owners badly need cash

the state has signed the concession

has lent eur 400 million to carmaker

nowadays, but experts warn that a pre-

contract with construction companies

ford for the refurbishment of its

mature company sale could mean a

Vinci and aktor, who will build the co-

craiova factory

lower price, making it a tough choice

manic-Brasov highway


See page 12

See page 20


JANUARY 25 - 31, 2010 / VOLUME 14, NUMBER 2

proceed with caution Lower consumption levels, the lack of available financing and fewer suitable real estate projects have led fmcG retailers to scale back store openings this year, while some retailers are reluctant to detail any plans at all LAURENtIU OBAE

see page 18

IN TOUCH PHOTO Of THe week Almost two months after current president Traian Basescu got the better of opposition leader Mircea Geoana in the crucial pre-election debate, accusations have surfaced that a presidential staff member sabotaged the PSD leader by sending negative vibes towards him. The media furore courtesy of traian basescu

drew comment that politicians’ choice of clothing color also influences their careers.

IN TOUCH Impolitic move Reading your coverage of the Romanian Finance Ministry’s decision to appoint two “celebrities” (Ministry of Finance tries to add stardust with celebrity hires, issue 1), I really hope that this isn’t another example of the political dumbing down that we’re seeing around the Western world lately. Okay, some stars have managed to make the transition from showbiz to politics – Ronald Reagan and Arnold Schwarzenegger in my own country to name two famous examples. But Romania has a serious task on its hands to get out of the current economic mess in which it finds itself, and this requires serious people, not distracting gimmickry.

No offence to Messrs [Dan] Bittman and [Andrei] Gheorghe, to whom I wish the best of luck in their new posts – they are sure going to need it. J Adams, California, US Human cost I refer to your article last week on bankruptcies (From boom to bust: Romanian firms bite the dust, issue 1). Looking back now, the boom of the last years seems insane and unsustainable. Salaries and the price of apartments rocketed, but without a foundation. So maybe some people say that this economic crash is the normal result. In Romania it always seems like the little guy suffers, while the ones at the top who cause the problems will always sur-

TAlk TO US ! vive. At the company where I work people have been made redundant. I still have my job – for now. But each one of these bankrupt companies means financial hardship for ordinary Romanians. Please, in the future let’s try to build solid companies that can sustain shocks and bad times too. Considering Romania’s recent history, local firms are clearly not going to have the tradition and experience that many long-time Western companies benefit from. And let’s also try to save some of our money instead of wasting it on the latest expensive “status symbol”. This way, if – or when – the next shock comes, people will be more prepared for it. Anca P, Bucharest

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Week in nUmBERs 1.2 billion

European Investment Bank lends Ford Romania EUR 400 million...

Carmaker Ford has upped its investment plan in Romania from EUR 675 million to EUR 1.2 billion

12% Around 12 percent of adminisCOURTEsy OF FOR5d

tration councilors in Romania are women, which is above the European average of 9.7 percent

0.5 % The World Bank forecasts an economic increase of 0.5 percent in Romania this year

1,366 The average monthly salary in Romania was RON 1,366 last year, according to recently released statistics

30% Bank payments dropped by 30 percent last year in Romania. compared to the previous year

2,650 As many as 2,650 employees of state-owned energy companies face the axe this year


Ford will use the funds for the investments needed to produce several new car models

The European Investment Bank (EIB) is lending EUR 400 million to Ford Romania for the expansion and refurbishment of the carmaker’s plant in Craiova. According to EIB officials, the Romanian authorities are providing a state guarantee for 80 percent of the loan value. “EIB funds, together with the

Romanian state support, provided on favorable terms at a time of difficult market conditions, will both help the Romanian economy to better face the consequences of the current economic crisis and contribute to the production of more environmentally friendly cars,” said Matthias Kollatz Ahnen, EIB VP, responsible for lending in Ro-

... while BCR lends EBRD funds to smEs Banca Comerciala Romana (BCR) is continuing to grant loans to SMEs, as a result of the extension of the financing facility previously agreed with the European Bank for Reconstruction and Development (EBRD) until October 30, 2010. This allows for the provision of a 20 percent non-reimbursable component, with the European Union and the Ministry of Regional Development and Housing’s support. “Apart from the non-reimbursable component covering up to 20 percent of the project value, SMEs also get free technical assistance from project consultants, including in drawing up the documentation requested by the EBRD and through monitoring the investment’s implementa-

tion,” said Ramona Ivan, executive director of BCR’s financial institutions division. According to her, over 40 percent of the SMEs in Romania are BCR customers. The beneficiaries of these funds can be SMEs that are active in industry, with priority sectors being: furnishing and wood processing; electronic, electro-technical and IT appliances; textiles; food; detergents and cosmetics; or spare parts and subparts. BCR has already financed over 20 investment projects mainly aimed at enhancing the technological production process, modernizing production units and improving working conditions. Anda Dragan

mania. The money will be used by Ford Romania to finance those investments needed for the production of a new B-segment vehicle with production to start in the near future, manufacture of the existing model Transit Connect and a new model scheduled to be launched later. The EIB money will also help to facilitate the production of a new small, advanced-technology petrol engine, with low fuel consumption. It is envisaged that expanded production capacity will represent an annual output of up to 300,000 vehicles and 300,000 engines. The EIB has also approved – in principle – a loan of EUR 200 million that will finance research, development and innovation for the development of vehicles and engines to be manufactured in the Craiova plant. However, these activities will be carried out in Ford’s facilities located mainly in Germany. Dana Ciuraru

AIG Life Asigurari Romania becomes Alico Asigurari Romania AIG Life Asigurari Romania has been rebranded as Alico Asigurari Romania, taking over the majority stakeholder’s name, American Life Insurance Company (Alico). The change affects only the signage and branding; the structure of the company, management team and strategy will remain unchanged. Within the business profile, the structure and specialization in life insurance, especially on guaranteed products, financial and investment strategy, product portfolio, distribution channels and the way the business is managed will also stay the same. Along with the name change, AIG Fond de Pensii will also become Alico Societate de Administrare a unui Fond de Pensii Administrat Privat. It too will maintain its organizational structure, team management and market strategy. Anda Dragan BUSINESS REVIEW / January 18 - 24, 2010


IFC and Varde allot EUR 450 million to buying up bad loans in CEE countries


The International Finance Corporation (IFC) plans to invest up to EUR 100 million to buy up nonperforming loans in Central and Eastern Europe, working alongside Varde Partners LP, a specialized distressed debt and asset firm. The proposed co-investment project, which could see up to EUR 450 million invested, aims to help local economies recover from the crisis by addressing the problem of bad debts and troubled assets. The project aims to ensure that banks in these emerging markets are able to continue to provide financing to businesses and credit to consumers, boosting economic activity and creating more jobs. The project

Unknown quantity: no lender active on the local market has made public its volume of bad debts

ImF could propose minor changes to stand-by agreement, review mission head says


The ImF delegation is in Romania on a visit postponed due to the political instability

The International Monetary Fund, which has a delegation in Romania until January 27 to review the country’s bailout loan, could make certain changes to the additional letter to the initial agreement, following its current evaluation, according to Jeffrey Franks, head of the IMF evaluation mission in Romania. However, they will not be dramatic, he added. “These are not radical initiatives, but we continue to evaluate the BUSINESS REVIEW / January 25 - 31, 2010

needs and the means to solve these needs. We are looking at the implementation and changes to some measures, if they are needed, but we are also looking at the areas where progress was made,” said Franks. “This doesn't mean we will modify the targets,” he added, saying this was the normal procedure. His statement comes after the Romanian finance minister Sebastian Vladescu said the authorities

were negotiating changes in the stand-by agreement with the IMF, adding that he had already received a document with proposed measures from the fund. The IMF mission currently in Romania is making the second and third revision of the IMF bailout loan, which should result in a further EUR 2.3 billion for the country. The fund said it would probably release the funds to Romania even though the country had failed to meet its proposed inflation target for last year. The annual rate of inflation was 4.7 percent last year, above the proposed Central Bank (BNR) target. The IMF has set an ambitious reform agenda for Romania this year, said Franks. “I am optimistic we can make significant progress in 2010 and that when the crisis is over, the economy will be ready to rebound,” said Franks. He added that the standby agreement with Romania was never in danger of being canceled, but only needed to be delayed due to the elections. 2010 will be a year of economic revival, said Franks, and Romania could be a success story, he concluded. Corina Saceanu

will also contribute to developing a transparent market for distressed assets, improving market efficiency, according to the IFC. “Eastern Europe is one of the regions most severely affected by the financial crisis, leading to a dramatic increase in bad bank loans. By investing in these bad loans, we can help banks redeploy their assets back into the economy, giving a boost to economic recovery and job creation,” said Lars Thunell, IFC executive vice-president and CEO. So far, none of the local or foreign lenders working in Romania has made public the volume of their toxic assets. Corina Saceanu

world Bank improves GDP growth projection for Romania The World Bank has increased its projection of GDP growth in Romania next year, from a previously estimated 2.5 percent to 4.2 percent, according to a recent report. The bank has maintained its forecast on economic growth, which will stay at 0.5 percent in 2011. The financial institution also expects a current account deficit of 4.9 percent for this year and 5.5 percent next year, which is below the previous forecasts. Mid last year, the World Bank was forecasting a current account deficit of 7.5 percent for this year and 8.7 percent for 2011. The world economy is predicted to grow by 2.7 percent this year and 3.2 percent next year, after having contracted by 2.2 percent last year. The World Bank is contributing to a EUR 20 billion lending package for Romania, along with the International Monetary Fund (IMF), the European Union and the European Bank for Reconstruction and Development (EBRD). Corina Saceanu 5


Fewer pennies put away for rainy day in CEE last year, survey finds did better, at 30 and 35 percent respectively, according to GfK. “In general, when money is available, it is spent rather than saved or invested. This is obviously a result of the financial crisis which hit most Central and Eastern Europeans in 2009,” said Alexander Zeh, team leader of the financial survey with GfK CEE Group. In Romania, the second most popular financial service is lending, while in other CEE countries, saving products occupy the same position. Bank accounts are the most commonly used financial product across the region. Corina Saceanu


The number of Central and Eastern Europeans able to save money fell throughout 2009, even though four out of five people have access to the banking system, according to a recent survey by GfK conducted in 13 countries in the region. The penetration rate of banking products is the highest regionally in Slovenia, at 100 percent, while Romania is second to last, with a penetration rate of just 54 percent, ahead only of Bulgaria. People in CEE countries became less able to save money during 2009. In Bulgaria, only 6 percent of the public managed to put money aside, while Lithuania and Slovakia

Visa Europe sees double digit growth in Romania

Catalin Cretu, head of Visa in Romania

Tax consultancy goes online

Prime Telecom completes merger with net Vision Telecom


Empty vessel: since the crisis hit, fewer Central and Eastern Europeans are managing to save cash

Visa Europe announced last week another year of double digit growth in Romania for the financial year 2009, as card uptake continues. According to the statistics, total transactions with Visa cards are up 23.2 percent by number and 32 percent by value, while the number of cards in circulation has increased by 5.4 percent to 6.2 million. The most significant change is in payment behavior at merchants. Romanian Visa cardholders spent 43.5 percent more through this channel, while the number of transactions rose by 42.5 percent. The share of retail sales using Visa cards

PricewaterhouseCoopers Romania (PwC) has launched the internet tools and, two new web-based solutions that expand the PwC offer to online tax consultancy services. allows individual clients to access a wide range of information in real time, including a daily update of the Official Gazette, daily reviews of the Romanian, European and international news and tax developments, as well as a summary of the latest updates to the Romanian tax system. In addition, customers will be able to debate tax issues on the website’s forum, and put questions to PwC tax and legal experts. The Big Four firm is also launching Click VAT, a software solution intended to give users access to de6

tails of new regulations and appropriate responses. “In the current economic environment, which continues to be tough for the business sector, companies should pay particular attention to the updates of the Fiscal Code. They must find ways to optimize their tax position and to maintain a healthy cash-flow. It is in this context that we have decided to take tax consultancy one step forward and become the first firm in Romania to offer online tax services, giving clients full 24/7 access to our databases, our tax best practices and our professional advice,” said Peter de Ruiter, partner, tax and legal services leader at PwC Romania. Anda Dragan

Romanian internet and voice provider Prime Telecom has bought local competitor Net Vision Telecom, after working in collaboration with the firm since 2008. The takeover and merger, which took place in December last year, was announced in the Official Gazette. The new entity will operate as Prime Telecom, and will have five individuals as shareholders, including two former members of the Net Vision management team and shareholding structures. The two firms had announced their partnership in November last year. The companies under the Prime Telecom brand were expected to post a EUR 10 million turnover by the end of last year, which would put them third on their market, after GTS Telecom and Euroweb, according to an announcement from Prime Telecom.

accounted for 2.2 percent of all personal payments, meaning that EUR 1 in every EUR 45 spent in Romania was on a Visa card. In the reported year (June 2008-June 2009), 26 percent of Visa transactions were made at merchants, while the volume spent in stores on Visa represented 12 percent of the total spend on the cards. In 2008, transactions at merchants made up 22.7 percent out of total transactions and 11.6 percent of total value. The average transaction value at POS remains EUR 45, similar to the level registered in 2008. Anda Dragan

“For 2009, we are targeting a 50 percent increase in our turnover, with a clear target to become number one on the market of alternative telecom operators in Romania,” said Marius Ionescu, head of sales and marketing at Prime Telecom. This was not the only merger for Prime Telecom last year. The firm has also merged with Vip Net, another local internet service provider. Prime Telecom has been working on the local market since 2001 and runs 8,000 kilometers of optical fiber across Romania and Bulgaria. Net Vision Telecom was set up in 2005, when it started supplying internet, data and voice services on optical fiber. Vip Net was set up in 1991, and provided data transfer and internet services. Staff BUSINESS REVIEW / January 25 - 31, 2010


Romanian firms stay optimistic in face of slow recovery, Horvath & Partners


most Romanian firms expect the recession to last into 2011, while half say they are not in crisis

More than half of Romanian companies believe the effects of the crisis will be felt into 2011 and expect further falls in their turnovers and cash levels, found a Horvath & Partners study on the effects of the recession on firms, conducted on 248 managers from Germany, Austria,

BUSINESS REVIEW / January 25 - 31, 2010

Switzerland, Hungary and Romania. The strategy of Romanian firms focuses on developing sales teams and strengthening distribution channels, while developing new regional markets and repositioning themselves in terms of pricing, according to the study. Liquidity management

issues, which were not a priority between 2001 and 2008, have led to predictions of liquidity falls over the long term for 70 percent of Romanian companies. The percentage is 55 percent for German and Austrian firms. However, Romanians kept their spirits up, with half of the interviewed companies saying that, despite decreasing sales, they were not in crisis. Measures planned by local businesses include an increase in transparency and improving monitoring systems, while upping business volumes. Secondary measures include stabilizing turnovers, reducing costs and ensuring liquidities, found the Horvath & Partners survey. While managers acknowledge the effects of the crisis and their impact, concrete measures are lacking. In Romania, 58 percent of the interviewed managers believe the recession will last between one and two years. Corina Saceanu

BRIEFs Sibex launcheS Stock trading platform ĂŠ The sibiu-based stock market (sibex) has launched its stock trading platform, after having previously traded only futures contracts. The first shares listed on the new platform were those of sibex itself. in the first stage, 15 brokerage firms will be able to intermediate transactions on this market. The sibex market is thus competing with the Bucharest stock Exchange (BsE). The stock market is planning to develop and consolidate the spot market through listing more issuers. sibex is planning to list its first companies and start listing bonds issuances. it has also launched a new product, a futures contract linked to the dow Jones index.



HDS Inmedio plans to add 35 new stores in 2010

courtesy of inmedio

HDS Inmedio already has a local network of 150 stores and plans to add 35 more this year

Media distribution and travel retailer HDS Inmedio, subsidiary of Lagardere Services, plans to open 35 new stores this year in Romania, after already reaching a network of 150 units throughout the country. HDS Inmedio runs shops under the Inmedio and Relay brands, having entered the local market in 2003. “Although the retail and real estate markets have been affected by the crisis, the expansion potential for our network in Romania is still high. We estimate that we will open over 35 stores this year. Considering the potential at national level, the expansion plans will continue in the next two-three years,” said Jean Luc Chassigneux, general manager of HDS Inmedio. The chain’s network reached 50

Bankruptcies could surge by 20 percent this year, Coface says


MRM launches new division, MRM Conectoo

laurentiu obae

The amount of companies going out of business in 2010 could rise by 15 to 20 percent on last year, when Romania saw 19,000 such cases, according to Coface. “The number of bankruptcies will continue to grow this year. Some of these will be transferred from 2009, because they haven’t been completed due to the judiciary strike. So there will be an increase in the first half of the year, after which we will see fewer bankruptcies in the second half,” said Cristian Ionescu, general manager of Coface for Romania, Bulgaria and Slovakia. Many firms are on the brink of bankruptcy but haven’t declared it yet, while others are asking for insolvency to protect themselves from their creditors, said Ionescu. The number of bankruptcies increased by 30 percent last year on 2008, according to data from Coface. The worst hit market segments this year will continue to be real estate, IT equipment distribution, the furniture

Cristian Ionescu, general manager of Coface for Romania, Bulgaria and Slovakia

industry, textiles, as well as transport and retail. The lack of bank financing was one of the reasons for the slowdown in activity. Last year, around 75 percent of ongoing loan contracts saw more than 90 days’ delay in repay-

stores in 2007 and doubled its size in 2008. Inmedio and Relay are visited by 1.4 million customers each month, according to the firm. HDS Inmedio is the Romanian subsidiary of Lagardere Services, a company which runs 4,000 stores in 21 countries and posted a cumulated turnover of EUR 3.5 billion in 2008. Lagardere Services’ portfolio includes stores which run under brands such as Relay, Virgin, Inmedio and Payot. In Romania, Relay shops are located in transit areas, such as airports, railway stations and metro stations, while Inmedio outlets operate in areas with high traffic, such as shopping gallerias, business centers and hotels. Corina Saceanu

ments, which was three times the figure registered in 2008. The number of people and companies with unpaid loans grew by 56 percent last year, to 700,000 people at the end of December last year. Corina Saceanu

MRM Worldwide Romania and Conect Soft have launched a new division within MRM, MRM Conectoo, which will offer e-mail marketing service Conectoo Enterprise. The division is already operational with Coca-Cola the first client. Bogdana Butnar, head of strategy & managing director of MRM Worldwide Romania, told BR she hopes that 5 percent of the agency’s revenues will come from email marketing activities this year and 10 percent in 2011. Following the integration of the email marketing division, MRM WorldWide Romania now offers digital communication services, web services, interactive communication, direct and e-mail marketing. According to Butnar, MRM closed 2009 with a turnover of around EUR 600,000 and she hopes that in 2010 it will reach EUR 800,000. MRM Worldwide Romania is part of McCann Worldgroup Romania. Clients include Cadbury, Caroli Foods, Coca-Cola, Dedeman, L’Oreal, MasterCard, Microsoft, Nescafe and Vodafone. Conect Soft was founded in 2005 by entrepreneur Bogdan Iordache. It launched Conectoo in 2007. Otilia Haraga BUSINESS REVIEW / January 25 - 31, 2010

CalenDaR/wHo’S newS

evenTS, BuSIneSS anD polITICal agenDa JaNuary 25 é 09.40 The Bucharest Stock Exchange starts its transaction session with

Horia-Roman Patapievici, president of the Romanian Cultural Institute, as guest, part of the program Public Figures Open the Stock Exchange. The event takes place on floor 14 of the BVB, IBC Modern building, 34-36 Carol I Blvd. é 11.00 The European Commission launches the national report Euro-

barometer 72, with national editor Silviu Matei and the Head of the European Commission delegation in Romania, Niculae Idu attending the event which takes place at the European Commission headquarters on 31 Vasile Lascar St, conference room 1st floor.

JaNuary 26 é 11.30 Inventor Dov Moran launches the modular handset, the lightest

phone in the world, at Capital Plaza Hotel (54 Iancu de Hunedoara St).

JaNuary 27 é 11.00 The Association for the Prevention of Fiscal Abuse organizes a

press conference at the Diplomatic Club Bucharest. By invitation only.

JaNuary 28 é 09.30-11.30 The US Embassy and the Romanian Council for Green

Buildings (RoGBC) organizes the interactive event Green Café – New Headquarters for the US Embassy in Bucharest. The event takes place at the American Cultural Center (10 Dumbrava Rosie St).

FEbruary 9 é Business Review organizes the eighth edition of the forum Tax, Law &

Lobby at the Intercontinental Hotel.

Romanian to lead white & Case office after expat departure Law firm White & Case has appointed Delia Pachiu as executive partner of its Bucharest office, following the departure of Todd Shollenbarger, the firm has announced. Pachiu has been part of the management team since the White & Case Bucharest office was established in 2008, with Shollenbarger at the helm. She will be responsible for further strengthening the firm’s local presence and building the office’s client portfolio by focusing on its core strengths in M&A, banking & finance, and energy & utilities. BUSINESS REVIEW / January 25 - 31, 2010

Qualified in Romanian law, Pachiu has over 15 years of experience in advising multinational and local companies, financial institutions and sovereign governments in cross-border projects and complex transactions. In addition to growing the local office, she will continue to advise clients as head of the energy and real estate practices of the Bucharest office. Neither the law firm nor Shollenbarger have commented on the reasons for the latter’s departure. Corina Saceanu



M IRCea T uRDean , 41, is the new general director of Farmec ClujNapoca. He took over from Mirela Lupas, having previously held the position of technical production director. Turdean joined the company in 1994 as a researcher. He is a graduate of the chemical technology faculty in Cluj-Napoca and of the Open University Business School in Great Britain.

11 years of experience in financial services. He joined GE Money Romania in 2006 but has more than five years’ experience within GE as he worked for the company previously between 1999 and 2000. During the past two years he has led the mortgage business of GE Money in Romania. He holds an MBA from the Crummer Graduate School of Business, Rollins College (USA), as well as a licentiate in aerospace engineering. Dragos is also a Charted Financial Analyst (CFA).

TeoDoR CuCu is the new creative strategy director of FRANK Group. He started his career working for Ringier and later joined MediaPro, and in the last eight years has amassed experience in advertising. Cucu previously worked for GMP Advertising as head of strategy, where he was involved in various projects that were nominated or awarded at festivals such as Effie, Cannes Lions, Epica, AdPrint, Golden Drum, Sabre, and the European Excellence Awards.

SIlvIu ISpaS, managing director of and EMI Romania, has stepped down from these positions and dedicated himself to other professional projects. He joined ARBOmedia in 2005 and was later nominated to set up and develop EMI Romania, the company that manages the local publishing activities of the ARBOmedia Group. Until a future decision is taken, all his operational responsibilities will be taken over by Thomas Landolt, president of the board of ARBOmedia AG.

C aTalIn D oBRe was promoted to group creative director at McCann Erickson for the Vodafone consumer account. He joined the agency five years ago as copywriter and has subsequently worked for clients such as Connex/Vodafone, Cadbury Romania (Kandia-Excelent), Fujitsu, Orkla and the Romanian Lottery. Dobre graduated from the University of Bucharest, the Faculty of Philosophy, in 2006. CRISTIan DRagoS will be appointed the new CEO of GE Money Romania this month. He replaces Ron Malak, who has accepted a new leadership role within GE Capital Global Banking, outside Romania. Dragos has

FIlIp SToICa was elected the new president of the National Association of Romanian Valuers (ANEVAR) after Adrian Vascu, the former president, ended his two-year term. He has been a member of ANEVAR since 1994. Stoica has been an ANEVAR lecturer since 2006 and last year he became an accredited member (MAA) of ANEVAR. He is also an expert accountant and member of the Body of Expert Accountants and Licensed Accountants in Romania (CECCAR), a financial auditor and member of the Romanian Chamber of Financial Auditors (CAFR) and a fiscal consultant and member of the Fiscal Consultants' Chamber in Romania (CCFR).

Business Review welcomes information for who’s news from readers. Submissions may be edited for length and clarity. Feel free to contact us at



Experts grapple with a taxing conundrum What should the state do when the economic crisis has left its coffers bare? Introducing new taxes and duties is the response of the Romanian authorities. Big Four specialists have analyzed for Business Review the likely outcomes of introducing new taxes such as those mooted for property, wealth and micro-enterprises. They also put stockexchange

forward their own solutions for how to revive the Romanian economy. Dana Ciuraru In the first few weeks of this year, the public debate has focused on the possible introduction of new taxes, on wealth, fast food, and the replacement of the minimum tax with a flat tax. Cited by the media as the font of these proposed new laws, the Finance Ministry dismissed the speculation and told Business Review that such initiatives come from other sources. “I have said, ever since the first day when I was appointed finance minister, that the system of taxes and duties will remain unchanged this year, except for the transforma10

Desperately seeking solutions: the state is anxious to find ways to fill its depleted coffers

tion of the minimum tax into a flat tax, for those economic areas with a high potential for tax evasion. All other discussion of a fast food tax, property tax and other issues was not generated by the Finance Ministry, but by MPs and members of the government,” finance minister Sebastian Vladescu told BR.

F iscal


Regardless of where these new tax ideas originated, they have become serious possibilities. Business Review asked some prominent tax specialists to mull them over. According to Mark Gibbins, head of taxation at KPMG in Romania, the idea of taxing property at its

market value makes sense, at least in theory, but he believes that in practice it could be difficult to apply. “Property values have fluctuated wildly over the last few years, rising several times between 2003 and 2008, largely driven by a speculative boom, and then in many cases halving in 2009. It is still too early to say what the true value of property should be, so it would be easier said than done to bring property taxes in line with current market values. In any case, the Fiscal Code already requires properties to have been valued in the last three years,” Gibbins told BR. Another difficulty the KPMG

expert foresees is that many citizens whose house or apartment has risen in value over the last few years still have very low incomes, and the increase in the value of their property has made no difference to their standard of living. Such people could be badly hit by a substantial rise in their property tax. “A further problem is that property taxes for legal entities in Romania are much higher than in most other countries in the region, which acts as a disincentive to investment. So if property taxes are to be brought into line with market values, local taxes for legal entities should also be reformed, so that Romania’s levels are competitive with those in neighboring countries,” he added. Turning to the suggested wealth tax, KPMG Romania’s head of taxation says that it is similar to the one levied in France, fashionable in the 1970s, which was found to make little difference to budget revenues, and sometimes even to dent them, because it encouraged tax evasion, or the transfer of assets out of the country. On the matter of the flat tax modifications, the Ministry of Finance has indeed initiated discussions to replace the minimum tax (payable by all taxpayers, with some exceptions) with a flat tax, which will be paid only by certain taxpayers, such as hotels, travel agencies, gyms, cosmetic centers, etc. “This flat tax will be paid by those taxpayers that provide direct services to the public, active in economic areas where it is presumed that companies do not issue tax receipts for all transactions,” Rodica Segarceanu, partner at Deloitte tax and head of the international & corporate tax team, told BR. In recent months there has also been considerable debate about micro-enterprises, following the introduction of the minimum tax last year. In 2010, the turnover tax regime for micro-enterprises is also BUSINESS REVIEW / January 25 - 31, 2010

TaxEs due to end, with such concerns becoming subject to profit tax at 16 percent said Gibbins. Some analysts support this measure, arguing that many microenterprises are simply structures which have been set up to reduce tax and social contributions (the practice of using micro-enterprises as an alternative to employment contracts is widespread). However, any changes to the regime for micro-enterprises should take into account the needs of those which are genuine and the risk to the economy if significant numbers of small businesses face a much higher tax burden.

s topping pering

cheats pros -

Tax specialists say that those affected by the introduction of such taxes or duties will be, obviously, taxpayers, estimating that the state budget will win in the short term. Miruna Enache, tax senior manager with the tax advisory & compliance department at Ernst & Young, told Business Review that the introduction of these new taxes will also damage the fundamental principles of taxation, like the fair taxation principle and the neutrality of fiscal measures. According to Deloitte specialists, the introduction of the new flat tax could have positive effects for taxpayers who do not fall within the scope of this levy. “It would eliminate unfair competition, as paying less tax allows some to get away with charging lower prices and so should be clamped down upon. For clarification, this would be possible if all transactions were recorded, as is done by those taxpayers who conduct their business fairly,” said Segarceanu. But the manager does not see the mooted changes as a panacea. “Bottom line, I do not think that the introduction of new taxes will bring the economy on the path of normality. Taking into account the new economic circumstances, key measures should be introducing facilities, staging, and the reductions of penalties, reducing from 0.1 percent to 0.02 percent the penalty per day of delay, according to bank interest rates.” taxation experts propose measures to revive economy

Mark Gibbins emphasizes that BUSINESS REVIEW / January 25 - 31, 2010

all tax measures should be considered not only in terms of their impact on state coffers, but also their effect on the economy. He cautions that raising taxes might seem appealing as a way to reduce the budget deficit, but in practice it could be counter-productive, because it could reduce individual spending, hurt businesses and deepen the recession, with a corresponding negative impact on budget revenue. But one step the government should definitely take is to make tax collection more efficient. There is a large underground economy, and the tax authorities should take active measures to combat fiscal evasion. Predictability of legislation is also important. In recent years, Romania’s tax legislation has been changed frequently, often at very short notice. In theory, according to Article 4 of the Fiscal Code, changes should be made only by a law (and not other forms of legislation), should take effect only from 1 January of the following year and “as a rule” be announced six months before taking effect. In practice these provisions are routinely disregarded, with many changes being made by Government Emergency Ordinance, in the middle of the tax year, with little warning. This lack of predictability is bad for business, because it makes forward planning difficult. Being able to plan ahead is even more critical during a recession, when money is tight. A real effort by the government to promote stable and consistent fiscal legislation could provide a boost to the economy. In addition, the government could help the recovery by issuing a coherent package, based on certain industries which it wants to promote. The Ernst & Young senior tax manager goes even further, proposing some practical measures such as tax exemption for sums held by taxpayers in accounts abroad and used for economic activities in Romania (encouraging the flow of liquidity to the country), a VAT increase, or reducing payroll taxes and social contributions of employees. It may matter less who came up with these suggestions than who makes the first step towards actually helping the economy return to normality. 11


Cash is king as market misery drives sales Anyone who has cash is in a position to make strategic acquisitions, which could mean gaining greater market share or penetrating new markets. But experts are warning entrepreneurs to make an exit from their business only if it is absolutely essential. Anda Dragan



At some stage, many businesspeople will sell their company, and hope that doing so will leave them with a nest egg. But any exit needs to be carefully planned, especially now that the current downturn has hit almost all economic sectors. On top of this, the crisis is making it increasingly difficult for owners to sell their companies at the prices they had hoped for. A proper strategy involves being in control of the business, having clear goals, being focused on them and having a plan for a profitable exit. But what happens when an entrepreneur decides to sell his or her business in a downturn? Is now the right moment for such a move or would it be better to hold off until Romania emerges from the recession? Many specialists recommend that owners sell now only if they are forced to do so by the current economic woes. If it does come to this, what should the seller expect? “An entrepreneur selling their business now will get a price that is two or even three times lower than before the crisis, depending on the type of business and field of activity,” says Valeriu Nistor,

Tough choice: many business owners badly need cash – but experts caution against premature sales

managing partner at SOAR Management si Investitii. From this perspective, it clearly makes sense for an entrepreneur to hold onto their business until the crisis passes if they want to get a reasonable price for it. According to Nistor, sale prices will return to a level comparable with those posted in 2007 and 2008 in the next twothree years. But Andrei Iordache, consultant at Visionwise, is slightly more pessimistic regarding any such recovery. “Prior to this economic slump we had the so-called roaring 2000s. Those times, together with the huge EBITDA multiples, will only return when the next bubble comes. Taking into account the economic history and human nature, I see this being in five to ten years. However, I would not take this estimate to the bank or the private equity fund,” says the consultant. In his opinion, for the past few years entrepreneurs have been

bargaining for so-called price premiums. “This means that after establishing a baseline price for a specific company, both parties spent a lot of time haggling over the monetary values of ‘market leadership’, ‘liquidity’ and other enhancements added to the company for sale,” says Iordache. He says that now, entrepreneurs are tending to get offers limited to the fair value of the company. “This is because the opportunity cost of money has skyrocketed in the last year.” Iordache underlines that prices are volatile and specific to each transaction. Furthermore, regardless of the price offered by private equity funds, entrepreneurs should do their own calculations and consider the following questions before making a final decision: Can the company survive without a cash or equity injection? Do I personally need the money right now.? “If one answers no to the first question and yes to the sec-

ond, than any deal is better than no deal at all,” says Iordache. “This basically means that if an entrepreneur is on the hunt for a good price, I would advise him or her to wait. If the decision to sell is about the future of the company or to meet a pressing need for personal cash, than a transaction is due,” adds the consultant. Of course, selling a business also requires willing buyers, of whom there are few in an economic downturn. This is the case not only in Romania, but also on other, mature markets. At international level, the number of small businesses sold fell 36 percent in the first quarter of 2009, compared to a year earlier, according to the marketplace for buying and selling small companies, Even if buyers’ interest is piqued, most don’t have the cash they had a year ago. Plus, the availability of capital from lenders or any other financial institutions is still restricted. Any entrepreneur who decides to sell their business needs to consider that the uncertainty of the economy is playing an important role in reducing the volume of sales. According to experts, the rule that sellers should take three years of a company’s financial situation into account when setting a purchase price and calculating how much cash they expect a business to generate, currently does not apply. As for likely purchase targets, Iordache says that market leaders could still be courted by private investors and even banks. “I would also recommend entrepreneurs embrace the trend towards consolidation which has started in certain industries such as specialized retailing – shoes, pharmaceuticals and telecom,” says the commentator. It is clear that anyone with cash to splash at present has a great opportunity to buy much more cheaply than in the past and, as a result, to gain market share or enter a new business segment. The market offers a wide range of ways to acquire companies that are forced to sell rather than go into liquidation, which could make it a seller’s market. BUSINESS REVIEW / January 25 - 31, 2010

PROPERTY Centerra to start work on Brasov project, Monte Carlo Palace 70 percent sold, owner wants to promote Monaco properties in Romania plans retail project in Timisoara

courtesy of cemterra

Centerra has bought land in Timisoara to build a retail park of 450,000 sqm GLA


the retail element, comprising some 125,000 sqm of office space in total. The existing buildings on the former Tractorul premises, some 15,000 sqm, have already been partially revamped by Centerra, which leased 7,000 sqm of the area to companies such as Computer Generated System (CGS), IBM, Freudenberg and Fresenius Medical. Centerra Capital Partners, which bought the former Tractorul platform in 2007 for EUR 77 million, was set up in 2006. Before getting involved in development with the Brasov and Timisoara projects, it also bought a 20th century villa in Bucharest, which was resold in 2008 to a retailer. Centerra was founded by two Romanian private equity professionals, Victor Vadaneaux and Silviu Savin, both with investment experience and track records in Western European buyout and venture capital transactions. In the future, the firm intends to offer property development and management services to third party property owners on a selective basis. Plans also include capitalizing on its private equity experience in Western Europe to make private equity investments, an untapped segment considering Romania’s longterm economic growth prospects. Cheyne Capital manages USD 6 billion of assets, coming from blue chip institutional investors such as pension funds and insurance companies, as well as investment offices of high-net-worth Western European and Asian families, according to the company. Corina Saceanu

courtesy of marvel group

Real estate developer Centerra Capital Partners, which will soon start working on its Coresi Shopping City project in Brasov, is also planning a retail project for Timisoara, where it owns 23 hectares of land. The developer, owned by investment fund Chayne Capital, is planning to build a retail park with 45,000 sqm of GLA under the name Timisoara South Gate at the city exit to Belgrade. The project, which will be developed in phases, has broken ground with a first opening scheduled for 2011, according to the company. Meanwhile, Centerra Capital Partners is planning to start working on its shopping center in Brasov, which will be built on the premises of the former Tractorul factory. The project will require EUR 110 million in total and will be built in two phases. The first will comprise 45,000 sqm of retail, out of which 10,500 sqm will be occupied by an Auchan hypermarket. The remainder of the project will include a shopping galleria, a DIY center, a furniture store and a sports shop. The second stage of the project, representing another 40,000 sqm of retail, will include 150 stores, coffee shops, restaurants and a multiplex cinema. Coresi Shopping City will open in 2011. The developer hopes to fund the investment through its own resources, while still pursuing alternative banking financing options. An office area will be added to

The block is near Herastrau Park

Real estate developer Marvel Group has sold 70 percent of residential project Monte Carlo Palace, which was completed back in 2008, the company has announced. The project was built on a 5,000-sqm

land plot in north Bucharest, close to Herastrau Park, and required an investment of EUR 18 million. The 14-floored project features apartments with prices between EUR 120,000 and EUR 800,000. The developer has decided to rent the remaining of unsold apartments, with rents ranging from EUR 900 for studios, to EUR 1,500 a month for three-roomed units, according to Edward Popescu, general manager of the project. The developing company is owned by Romanian-born businessman Christian Popescu, who has been living in Monaco for the last 17 years. He is also the owner of Galerie Vendome Palace, a mixed project which will feature a fivestar-plus hotel and a commercial galleria, to be opened in Bucharest in 2012. Galerie Vendome Palace will be located close to Calea Victoriei and works on this project should start in April this year. Investor Popescu plans to promote Monaco properties in Romania through John Taylor, DTZ and Coldwell Banker, according to the firm. Corina Saceanu

Warehouses De Pauw in frame for EUR 80 mln EIB loan for Romanian warehouses The European Investment Bank (EIB) could lend up to EUR 80 million to logistics developer Warehouses De Pauw, fueling the establishment of four logistics centers in Romania, according to a recent EIB announcement. The four projects, which come with a total investment cost of EUR 200 million, would be built close to Bucharest, in Corbii Mari and Fundulea, while a third and a fourth unit will be located close to Ploiesti and Pitesti, respectively. The lending is under consideration by the EIB. WDP, which is listed on the Brussels and Paris stock exchanges, builds and rents warehouses in Belgium, the Netherlands, the Czech Republic, France and Romania. “In 2008 and 2009 WDP obtained the required PUZ permits in phases for the various sites in Romania. The company has decided for the time being not to start any

projects involving risk here, and to concentrate on the construction of properties that have been pre-let. Consultations are currently ongoing with potential lessees to consider whether customized projects can be started up in the course of 2009,” WDP wrote in its most recent annual report. “This will be undertaken via WDP Development RO, in a 51:49 joint venture with the entrepreneur and specialist for Romania, Jeroen Biermans,” added the company. Last year the company started a share issuance, which resulted in EUR 37 million of additional capital raised for ongoing projects. “These will comprise pre-let own developments or acquisitions of one or more premium-quality sites in Belgium, France, the Netherlands or Romania,” the company has said. Corina Saceanu BUSINESS REVIEW / January 25 - 31, 2010

PROPERTY Lidl to buy land plot in capital from Pepsi Americas

courtesy of lidl

Low-cost retailer Lidl has been buying land in Romania for several years

Pepsi Americas has agreed to sell an 11,000-sqm land plot in south Bucharest to discount retailer Lidl, which will build a store there, according to an announcement published recently in the Official Gazette. The sale price will be EUR 285 for sqm, which puts the total land price at EUR 3.1 million. The site previously hosted Pepsi America’s warehouses. They were moved to its new production facility in Dragomiresti Vale, which opened in

September last year. Lidl has been active in Romania for several years, during which time it has acquired various plots of land, but has yet to open its first store in the country. The retailer is also working on a warehouse and offices in Chiajna, which should be completed this year, according to previous information. Lidl is part of the Lidl & Schwartz Group, which operates discount hypermarket chain Kaufland in Romania. Staff

DTZ Echinox wins Shopping City Sibiu and Suceava management contracts

Antalis leases 10,000 sqm in Portland Trust’s Bucharest West warehouse project

BUSINESS REVIEW / January 25 - 31, 2010

extend the range of products for the advertising industry. The new location will provide the extra space needed,” said Lorett Mincu, managing director at Antalis Romania. Antalis, which distributes communication support materials, is owned by the French financial group Sequana. The lease was part of an integration strategy started one year ago, when Antalis Romania took over Map Merchant Romania, a player on the paper market. The two companies reported a combined turnover of EUR 35 million at the end of 2008. This is not Antalis Romania’s first leasing transaction. In 2009 the company relocated its offices to a building with a surface of over 1,100 sqm in the Unirii area of downtown Bucharest. Staff

courtesy of dtz echinox

Antalis Romania has leased 10,000 sqm of warehouse and office space in Bucharest West Light Industrial Park, developed by Portland Trust on the A1 highway. This is the first big lease deal of 2010 and comes after a flat year in terms of leasing contracts for the local real estate market. The new warehouse space consolidates logistics operations, previously run by Antalis from two different locations situated in the same industrial park. “This move is an important one given the current economic circumstances and will be reflected in the quality of the services offered to our customers, as it will increase the efficiency of processing orders from receipt to delivery to the customer. This year we also plan to develop the new packaging division and to

Shopping City Suceava has 48,000 sqm of GLA

Real estate agency DTZ Echinox has been appointed by Argo Real Es-

tate to handle the property management of Shopping City Suceava and Shopping City Sibiu. The new contracts triple the size of DTZ’s property management portfolio, according to the company. The two projects together reach 130,000 sqm of GLA. Shopping City Sibiu, some 80,000 sqm of GLA, was opened in November 2006 and extended in 2007. It is anchored by Real Hypermarket, Carrefour, Baumax DIY and Media Galaxy, among others. Shopping City Suceava has 48,000 sqm of GLA. Anchors include outlets of leading international retailers, such as a Carrefour hypermarket and a Mobexpert furniture superstore. DTZ Echinox’s property management department manages 59,000 sqm of retail space in Iris Shopping Center and Macromall Brasov, as well almost 11,000 sqm of office buildings – EvoCenter One and Baneasa Business Center, owned by Black Sea Global Properties. Corina Saceanu 15


Flower power sees profits bloom With a business model that stems from the Netherlands, Gradina Bakker Olanda has flourished on the local market and could plant the seed of inspiration for other budding entrepreneurs interesting in selling flower bulbs. Anda Dragan


courtesy of bakker

Beauty can be found in almost any business, due to each one’s distinctiveness, the challenges it poses and the rewards it offers the entrepreneur behind the figures. But when that business is selling flowers, the beauty is more obvious to the naked eye. The current crisis has not caused every company to wilt, with one such example being Dutch firm Bakker, which specializes in trading flower bulbs. It entered the local market in the fall of 2007, initially operating through a local representative. But the business bloomed quickly after its entrance, and Gradina Bakker Olanda was established in Romania at the beginning of 2009. The 100 percent Dutch company is the sole holder of the rights to trade Bakker products on the local market. But why did it make the move, when the first signs of the crisis were already sprouting in Romania? The answer is simple: with Romania and other countries’ accession to the EU, the company wanted to benefit from the great potential that these markets offer. Another significant reason for trying to penetrate the local market was that Romanians are keen gardeners. But the local competition is fierce, and breaking into the flower market is no mean feat. “Our competition comes mostly from the retail sector, meaning garden centers. However, we can offer a much wider range of products, and of higher quality, thanks to our high-end production facility in Holland,” says Robert Jan Prick, general manager of Gradina Bakker Olanda. In his opinion the firm’s array of products is one of the main competitive advantages it has over other players on the market.

Blooming business: Robert Jan Prick, general manager of Gradina Bakker Olanda. says his firm’s competitive advantage is the wide choice and high quality it brings to the market

The business model is quite simple: a customer can order from the product catalogue by post, phone or fax, and collects their parcel from the nearest post office. Prick says that he can’t generalize too much about the type of customers that use Gradina Bakker Olanda’s services, but that potential buyers are familiar with mail order. “Once people discover the ease of home delivery, they usually remain loyal.” The cost of the bulbs depends on the type of plant. “Sometimes we sell five or ten plain flower bulbs for a discount price of RON 20, or at the high end of the scale 25 trees or hedges. The latter can cost up to RON 600,” says Prick. There are also additional services: a guarantee of up to five years on perennials and one for all bulbs; customer care; and extra information about plants. The company also offers consul-

tancy services for its VIP customers on how to landscape their garden. These additional services are essential in the current climate, because simply selling a product is no longer enough to keep your customers. Most – but not all – of the company’s products come from the Netherlands. Some roses come from Italy and even as far afield as Kenya. As for delivery, the company can do it only when weather conditions permit, both in the Netherlands and Romania. The firm also lets its customers choose when they want to receive their parcel. “If the customer orders in season and wants the order direct, we deliver it within seven working days,” says Prick. But even this business is not all roses. Prick has had trouble convincing new customers that the ease of home delivery can be combined with the high

quality of the Dutch bulbs. “Many people do not think it possible, until they experience it themselves for the first time,” says the general manager. The most difficult point in setting up the business was surmounting Romanians’ lack of familiarity with mail order companies, as well as getting the distributors to deliver the parcels within the desired timeframe, and for a reasonable cost. “Our relationship with the Romanian Post has improved significantly after two years of collaboration, because we have come to understand each other’s needs and restrictions better,” says Prick. At the moment, Gradina Bakker Olanda remains a mail order specialist. “But our competitors are looking to expand and will enter onto the local market,” says Prick. This could present a big challenge for the company in the years to come. However, Bakker is now present in twenty European countries, with a market share between 50 and 100 percent. In future, the general manager says that the company has expansion in all EU countries on its agenda. “We are currently improving our production process, which should make it possible to penetrate large markets such as Russia and Ukraine in the years to come,” says Prick. He adds that the company does not intend to extend throughout a franchise system because “we have had some experiences with joint ventures and they were not always successful.” The current crisis is temporarily putting a brake on Bakker’s growth but Prick remains optimistic: “I expect that 2010 will be another difficult year, but I also think that our current strategy, which combines an assertive marketing approach with very good after sales services, is proving to work.”

Bakker é Global turnover in 2009: EUR

150 million é Predicted global turnover growth

in 2010: 2-3 percent é Number of employees in Roma-

nia: 6 (not including marketing staff) é Countries present: Romania, Belgium, Luxembourg, France, Italy, Switzerland, Austria, Czech Republic, Slovenia, Germany, Denmark, Sweden, Norway, Great Britain and the Netherlands BUSINESS REVIEW / January 25 - 31, 2010


FMCG retailers return to small, cautious steps After several years of doubling or tripling the size of their store networks across Romania, FMCG retailers have slowed down their expansion. The lack of money, paucity of real estate projects available and slump in spending are all dissuading retailers from announcing new stores. Only a few are still opening new units in 2010 three years ago.


and not at the same pace as two or Auchan is planning to open one store in Constanta in 2010 and another in Brasov the year after

Corina Saceanu Modern retail covers 43 percent of the local consumption market, with hypermarket and discounter stores being the most dynamic formats. While in their glory days, two years ago, hypermarket operators were announcing plans to rapidly increase their network of stores in Romania, piggybacking on the boom in the real estate market, their strategies have changed. Openings are weighed up carefully. Money is no longer so readily available and comes with higher costs, while suitable real estate projects are thin on the ground. This adds to the less than rosy expectations over any consumption increase in Romania over the next two years. Apart from being reticent about new openings, fast moving consumer goods (FMCG) retailers are also cautious in announcing their expansion plans. French giant Carrefour is taking a silenzio stampa approach to its extension hopes, after focusing almost exclusively on its supermarket format last year. Metro Cash & Carry, the biggest retailer in Romania turnover wise, is behaving similarly. It has only recently announced its plans to open a new cash & carry unit in Bucharest this year, without mentioning the exact location or project within which it could be included. French retailer Auchan is however 18

more open to disclosing its expansion plans. “This year we will open a store in Constanta and in 2011 one in Brasov, as part of the Coresi Shopping City project,” Patrick Espasa, general manager of Auchan Romania, tells Business Review. These two are confirmed projects, but the retailer has some others close to being signed, among which is a “very important one” in Bucharest, Espasa reveals. In Constanta, Auchan will open a store in the Polus Center project. The chain has two shops in Bucharest and seven across the country in total. Its plans are to double this network in the next three to five years. With an average investment per store of EUR 20 million, the seven new outlets should cost the retailer EUR 140 million by the end of the period. “For the new units we are considering Bucharest, as for us it is important to cover all important cities in Romania and expand even more in the capital. Then comes the viability of the project itself, the client traffic it could generate and the importance of the shopping center,” says Espasa. In Bucharest there are currently 17 hypermarkets and 8 cash & carry store units. One change in the French retailer’s strategy is its plan to buy future stores, rather than just lease the retail space from real estate developers.

Auchan opens larger hypermarkets, as does Cora. Store sizes are around 15,000 sqm, while for example the Carrefour branch that opened last year in Era Shopping Park Oradea covered 9,000 sqm. Cora however has had the slowest expansion pace. It entered the local market in 2001, and after opening two branches in Bucharest, added a third in Cluj-Napoca in 2006, in which it invested EUR 20 million. This year it will open its third store in Bucharest, within the Sun Plaza shopping center. Cora has also signed a leasing contract for 8,000 sqm in Gold Plaza shopping center in Baia Mare, one of the few ongoing retail projects. Retailer Real, with three stores in Bucharest out of a total of 24 in Romania, has not announced expansion plans for this year. The firm opened four stores last year, following on from another six in 2008. Meanwhile, Kaufland’s smaller size and discount-oriented hypermarkets were more suited to expansion last year and, based on the progress of 2009, the firm could add some more units this year too. The German retailer has aggressively expanded since its 2005 market entry in Romania, having reached 45 hypermarkets across the country. In the first three months of this year, Kaufland will open five or six more stores. The retail-

er’s typical investment in a store is about EUR 9 million. One of Kaufland’s advantages for expansion is the financing provided by the European Bank for Reconstruction and Development (EBRD). The retailer took out a EUR 150 million loan from the EBRD mid last year, which should fuel its expansion with 20 stores across Romania and 13 in Bulgaria. Despite being one of the most aggressive companies in terms of expansion, Kaufland has kept a low profile in announcing anything strategy related. The lack of suitable real estate projects is one of the impediments to the expansion of those retailers whose strategy is to open units within larger projects. Had all the projects which were announced a couple of years ago been started, retailers would now have had a wider choice. Projects like Parklake Plaza, Mega Mall, Casa Radio and Promenada Mall in Bucharest have all been delayed. Meanwhile, some real estate developers are trying to shift to different formats, after the shopping mall and retail park options have already been tried out. Developer RED is planning a network of smaller shopping centers under the Cadran brand, across third tier towns in Romania. The developer has already secured financing for a first such project in Husi, which will be anchored by Penny Market. Such small projects have room either for a discounter or a supermarket, which could be using the opportunity to expand across the country. This strategy follows an international pattern, as turbulent economic conditions have led to a re-evaluation of channel strategies by the world’s leading retailers, according to Planet Retail. Proximity retailing is poised for a boom, driven by the expansion of discounters and other small-box grocery outlets. Looking specifically at the top 30 global grocery retailers, the economic downturn has led many to cut back on hypermarket openings due to a slump in consumer spending and the relative cost of operating big-box outlets, according to Planet Retail research. “As capital expenditure budgets get squeezed, resulting in a slowdown across virtually all channels, it has become more important than ever for retailers and manufacturers to be sure they are investing in winning formats and in the winning regions,” said Natalie Berg, Planet Retail’s grocery research manager. BUSINESS REVIEW / January 25 - 31, 2010


After rough ride, Romania takes the concession route to build its highways The first concession contract to build a highway in Romania was signed last week, more than two years after the idea was proposed. The 55kilometer road, which connects Comarnic to Brasov, is a premiere in Romania also because it will be built in a mountain area. The highway, which will be constructed by Vinci and Aktor, should be ready in 2014, one year after the ongoing 415kilometer Transylvania highway is due to reach completion. After that, Romania will have four highways, courtesy of bechtel

totaling almost 800 kilometers, similar to the amount that France had 30 years ago. Corina Saceanu French construction company Vinci and Greek contractor Aktor have signed the EUR 1.2 billion contract to build the Comarnic-Brasov highway, which should be finished within the next four years. The pair have also won the concession contract to maintain the highway for another 26 years after it is finished. This is the first concession contract for the building of a highway in Romania. For the ongoing Transylvania highway project, construction company 20

Hit the road: when the current crop of projects are finished, Romania will have nearly 800 kilometers of highway

Bechtel is in charge only of construction works. The Romanian state will spend EUR 4.8 billion on the Comarnic Brasov project over the next 30 years, out of which the cost of the main loan will be EUR 3.1 billion, the expenses involved in the subordinated loan EUR 670 million, and the cost of running the highway EUR 323 million. Taxes and other financial costs will reach EUR 584 million, while inflation will add another EUR 146 million to the tab. The cost of operating the highway will however be higher,

and the remainder should come from the concession taxes. Overall, the Romanian state will pay around EUR 87 million for each kilometer of road. The construction cost alone is EUR 21.8 million per kilometer, which, according to the Ministry of Transportation, is among the lowest in Europe. For comparison, the price per kilometer of a similar highway in France was EUR 46 million, and in the UK, EUR 32 million. The 55-kilometer highway will be built in a mountain area and will

have 16 bridges and viaducts, with five main traffic nodes along the way in Comarnic, Sinaia, Busteni, Predeal and Rasnov. Out of the 55 kilometers, 30 kilometers will be made up of tunnels. The two construction firms and their sister companies Vinci Concession and Aktor Concession beat two other consortia, which had also placed offers, to the contract. The first was made up of Strabag, Egis Projects, Eurovia Construct International and Housing & Construction Holding, while the second involved Bilfinger BUSINESS REVIEW / January 25 - 31, 2010



BUSINESS REVIEW / January 25 - 31, 2010

Eu poverty awareness campaign gets local contribution

Hand to mouth: nearly 84 million European union citizens live below the poverty line

Romania will participate in programs within the EU poverty awareness campaign, as 2010 has been declared a year in which poverty and ways to alleviate it will come under scrutiny. Last week on January 21, the European Commission and the Spanish Presidency of the European Union launched the

2010 European Year for Combating Poverty and Social Exclusion. The event was launched with an inaugural conference in Madrid hosted by Spanish Prime Minister Jose Luis Zapatero and European Commission President Jose Manuel Barroso. Almost 84 million Europeans – or

Recoil comes to Romania

courtesy of recoil

Berger and Porr. The consortium led by Strabag contested the result of the bid, which delayed the negotiations stage and the signing of the contract by six months, until November last year. The winning consortium was represented by local law firm PeliFilip and Linklaters, which have worked for more than a year on the public acquisition project. Following the signing of the deal, the consortium needs to find financing for the project, while they also have one year to complete the technical studies and draft the technical design. “We are interested to know whether they can find financing, as they could come and tell us they are giving up. But we believe that since they are such a powerful consortium, they will find a solution. European Bank for Investments (EIB) representatives said they were interested in covering some of it,” said transport minister Radu Berceanu. Vinci Group posted a turnover of over EUR 35 billion worldwide in 2008, while its total investments in Bucharest have exceeded EUR 450 million. Aktor Concessions & Aktor are members of the Ellaktor group, which in 2008 had a consolidated turnover of more than EUR 1.9 billion. It took six years from the signing of the contract for the first 42 kilometers of the Transylvania highway to be completed in December last year. The deal was inked in 2004 but the project was delayed due to a renegotiation along the way and to expropriation issues. During the period, Romania changed five ministers in charge of transportation. The 415kilometer-long highway, which will connect Brasov to Bors, in the west of Romania, close to the Hungarian border, will be built at an average cost of EUR 11 million per kilometer. Romania currently has 261 kilometers of highway, according to the National Highway Company (CNADNR), while the entire network of roads in the country reaches 200,000 kilometers. The proportion of highways out of the total road network is 0.13 percent, and will grow to 0.4 percent when both the ComarnicBrasov and Transylvania highways are finished. By comparison, Germany’s interurban road network has a total length of more than 231,000 kilometers, out of which motorways make up around 12,550 kilometers and federal highways around 40,700 kilometers. Highways make up 23 percent of the total length of roads in the country.

Ex Depeche Mode man Alan Wilder

Recoil, the long-term musical project of former Depeche Mode member Alan Wilder, will arrive in Romania on April 2. Selected Events 2010 – A Strange Hour with Alan Wilder & Paul Kendall will take place at FRONT | The ARK Club. Wilder will launch the latest Recoil album, Selected, in spring of this year. The release will be accompanied by a promotional tour, the

first time Wilder has gone on the road since he left the British outfit. The tour will include dates all over the continent. Tickets for the Bucharest leg cost RON 75 and can be bought online from and as well as from the Diverta network, Muzica stores, Off the Record, The Kitchen and FRONT/The Ark. The Recoil gig is being produced by One Event. Wilder started Recoil in 1986 while he was still a member of Depeche Mode. His first release under the new project was EP 1+2, followed by the album Hydrology. The artist then went on to release Bloodline, a musical effort for which he teamed up with famous names from the business such as Moby, Toni Hallyday (from Curve) and Douglas McCarthy (from Nitzer Ebb). Following Wilder’s departure from Depeche Mode in 1995, he released Unsound Methods, a 1997 album with gospel and electro tinges, and then the critically acclaimed Liquid in 2000. Otilia Haraga

17 percent of people across the EU – currently live below the poverty line. The 2010 European Year aims to raise awareness of the causes and consequences of poverty in Europe, both among key players such as governments and social partners and among the public at large. It also aims to mobilize these different partners in the fight against poverty, promote social integration and inclusion and encourage clear commitments on drawing up EU and national policies to tackle poverty and social exclusion. The year’s activities will be largely decentralized, with national programs drawn up by each of the 29 countries taking part (the 27 EU states plus Norway and Iceland). A EUR 17 million budget will support awareness-raising campaigns at European and national levels and hundreds of national projects linked to the different national priorities. Otilia Haraga

Green Hours hosts jazz gigs Dyas, a duo of accordion players Drenska Yova and Andrej Serkow, will perform at Green Hours club in Bucharest on January 28 at 10 pm as part of a special event entitled Austrian Hours. Yova, who hails from Bulgaria, and Ukrainian Serkow have been playing together since 2003. Their first CD, Together, was awarded the Pasticcio prize by the Austrian Radio. The pair play music that mingles classical themes with traditional Eastern European elements, so their style is somewhere between jazz and the Eastern European tradition. As part of Austrian Hours, organizers the Austrian Cultural Forum have invited five jazz bands to deliver a musical program with the saxophone and accordion. Otilia Haraga 21


Romanian production runs next month on cinema screens

Radu Mihaileanu gets six Cesar nominations

courtesy of berlinale

nominated for best film, original script, director, music, sound and editing. The production was filmed in Romania, Moscow and Paris with a budget of USD 21 million. The film is the tragicomic story of a former conductor at the Balshoi Theater in Moscow who was fired 27 years earlier for refusing to denounce the Jewish members of the orchestra and now works in the same place as a janitor. In the movie, he puts together a bogus orchestra from the theater, which maintains it is the official representative for a concert at the Chatelet Theater in Paris. Despite having left his native land many years ago and seeing his career flourish in France, Mihaileanu says he has always felt emotionally connected with Romania, and feels compelled to return to his homeland repeatedly. Otilia Haraga

The Romanian production has been included in the Berlin International Film Festival

Romanian production If I Want to Whistle, I Whistle, from Florin Serban, will premiere in country cinemas at the end of next month. The movie was included in the Berlin International Film Festival, which takes place from February 11-21 and competes alongside another 25 productions such as The Ghost Writer by director Roman Polanski and Shutter Island, the latest Martin Scorsese. The film is about love and the

teenage years, according to the director. It tells of Silviu, who spends four years in prison on the shores of the Danube. Just before his release, he finds out that his mother has returned home from a long period in Italy and wants to take his little brother away. He has only five days to come up with a solution. He also falls in love with a beautiful sociology who comes to the penitentiary as part of her course. Otilia Haraga

Burns Supper raises funds for the sensory impaired

Skal Club Romania has new executive board

The Concert was part filmed in Romania

The latest film by Radu Mihaileanu, a Romanian-Jewish director who left the country in 1980 and finally settled in France, has garnered six nods for the prestigious Cesar Awards, the French equivalent of the Oscars. The Concert was

courtesy of light into europe

Burns, baby Burns: the birth of the famous Scottish poet was celebrate with a fundraising ball

The seventh fundraising ball Burns Supper, which celebrates the birth of Scottish poet Robert Burns, took place in Bucharest on January 23 at the Intercontinental Hotel, in the presence of the British ambassa22

dor, Robin Barnett. The ball was organized by the foundation Light into Europe. Guests made donations in aid of children and young people with sight and hearing problems.

Diplomats, business people and celebrities joined in the party and enjoyed dances, bagpipes and Scottish specialties. The proceeds from the event will be used by the Light into Europe foundation to edit and print books in Braille and help the hundreds of local families caring for someone with hearing or sight deficiencies. Romania’s more than 85,000 blind or partially-sighted people and 30,000 hearing-impaired adults are vulnerable to daily isolation and discrimination. There are also tens of thousands of children with sight or hearing difficulties who study in special schools. Most of these children are cared for by their families and do not have access to education adapted to their specific needs or the chance to seek employment. In Romania, nine out of ten people with sensorial deficiencies depend exclusively on state aid. Otilia Haraga

Skal Club Romania has a new executive board, which will be headed from now on by president Michele Meoni, CEO of Continental Hotels; honorary past president Anthoni Kuhnen, president of AVCO Consulting; and vicepresident Sonia Nastase, general manager of Hotel Howard Johnson Grand Plaza. The board is changed once every two years through free elections.Skal International Bucharest is an organization that brings together all sectors of the tourism industry- hotels, tour operators, airlines, event organizers and related services in the field of hospitality. Skal Club Romania currently number 76 members who meet 11 times a year, on the second Thursday of each month, except August. The association declared that its main objective for this new mandate would be to set up new regional branches of Skal around Romania, in the cities of Sibiu, Oradea, Brasov, Tirgu Mures, Constanta and Suceava. Otilia Haraga BUSINESS REVIEW / January 25 - 31, 2010

Business Review Issue 2, January 25-31, 2010  

Proceed with caution Lower consumption levels, the lack of available financing and fewer suitable real estate projects have led FMCG retail...