LAU

REN

tIU O

BA

E

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

see page 18

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

see page 18

newsthe european investment Bank (eiB)

has lent eur 400 million to carmaker

ford for the refurbishment of its

craiova factory

See page 4

moneymany business owners badly need cash

nowadays, but experts warn that a pre-

mature company sale could mean a

lower price, making it a tough choice

See page 12

focusthe state has signed the concession

contract with construction companies

Vinci and aktor, who will build the co-

manic-Brasov highway

See page 20

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

proceed withcaution

proceed withcaution

BUSINESS REVIEWROMANIA’S PREMIERE BUSINESS WEEKLY JANUARY 25 - 31, 2010 / VOLUME 14, NUMBER 2

www.business-review.ro

BUSINESS REVIEW / January 25 - 31, 2010 3

I N   T O U C H

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co

urtesy o

f traia

n ba

sescu

PHOTO Of THe week

Almost two months after cur-

rent president Traian Basescu

got the better of opposition

leader Mircea Geoana in the

crucial pre-election debate, ac-

cusations have surfaced that a

presidential staff member sab-

otaged the PSD leader by

sending negative vibes to-

wards him. The media furore

drew comment that politicians’

choice of clothing color also

influences their careers.

Business Review is a foundingmember of the Romanian AuditBureau for Circulation (BRAT)

Impolitic move

Reading your coverage ofthe Romanian Finance Min-istry’s decision to appoint two“celebrities” (Ministry of Fi-nance tries to add stardustwith celebrity hires, issue 1), Ireally hope that this isn’t an-other example of the politicaldumbing down that we’re see-ing around the Western worldlately.

Okay, some stars have man-aged to make the transitionfrom showbiz to politics –Ronald Reagan and ArnoldSchwarzenegger in my owncountry to name two famousexamples.

But Romania has a serioustask on its hands to get out ofthe current economic mess inwhich it finds itself, and thisrequires serious people, notdistracting gimmickry.

No offence to Messrs [Dan]Bittman and [Andrei] Gheo-rghe, to whom I wish the bestof luck in their new posts –they are sure going to need it.

J Adams, California, US

Human cost

I refer to your article lastweek on bankruptcies (Fromboom to bust: Romanian firmsbite the dust, issue 1). Lookingback now, the boom of the lastyears seems insane and unsus-tainable.

Salaries and the price ofapartments rocketed, but with-out a foundation. So maybesome people say that this eco-nomic crash is the normal re-sult.

In Romania it always seemslike the little guy suffers, whilethe ones at the top who causethe problems will always sur-

vive. At the company where Iwork people have been maderedundant. I still have my job –for now. But each one of thesebankrupt companies means fi-nancial hardship for ordinaryRomanians.

Please, in the future let’s tryto build solid companies thatcan sustain shocks and bad times too. ConsideringRomania’s recent history, localfirms are clearly not going tohave the tradition and experi-ence that many long-timeWestern companies benefitfrom.

And let’s also try to savesome of our money instead ofwasting it on the latest expen-sive “status symbol”. Thisway, if – or when – the nextshock comes, people will bemore prepared for it.

Anca P, Bucharest

I N   T O U C H

Please send your letters to editorial@business-review.ro, including your name and location.

For consideration for inclusion in the next edition, letters must be received by noon on Thurs-

day. Letters may be edited for length, clarity and accuracy.

n E w s

BUSINESS REVIEW / January 18 - 24, 20104

Banca Comerciala Romana(BCR) is continuing to grant loansto SMEs, as a result of the extensionof the financing facility previouslyagreed with the European Bank forReconstruction and Development(EBRD) until October 30, 2010.This allows for the provision of a 20percent non-reimbursable compo-nent, with the European Union andthe Ministry of Regional Develop-ment and Housing’s support. “Apartfrom the non-reimbursable compo-nent covering up to 20 percent ofthe project value, SMEs also getfree technical assistance from proj-ect consultants, including in draw-ing up the documentation requestedby the EBRD and through monitor-ing the investment’s implementa-

tion,” said Ramona Ivan, executivedirector of BCR’s financial institu-tions division. According to her,over 40 percent of the SMEs in Ro-mania are BCR customers. The ben-eficiaries of these funds can beSMEs that are active in industry,with priority sectors being: furnish-ing and wood processing; electron-ic, electro-technical and IT appli-ances; textiles; food; detergents andcosmetics; or spare parts and sub-parts.

BCR has already financed over20 investment projects mainlyaimed at enhancing the technologi-cal production process, modernizingproduction units and improvingworking conditions.

Anda Dragan

The European Investment Bank(EIB) is lending EUR 400 million toFord Romania for the expansion andrefurbishment of the carmaker’splant in Craiova.

According to EIB officials, theRomanian authorities are providinga state guarantee for 80 percent ofthe loan value.

“EIB funds, together with the

Romanian state support, providedon favorable terms at a time of diffi-cult market conditions, will bothhelp the Romanian economy to bet-ter face the consequences of the current economic crisis and con-tribute to the production of more environmentally friendly cars,” said Matthias Kollatz Ahnen, EIBVP, responsible for lending in Ro-

mania.The money will be used by

Ford Romania to finance those in-vestments needed for the productionof a new B-segment vehicle withproduction to start in the near fu-ture, manufacture of the existingmodel Transit Connect and a newmodel scheduled to be launched later.

The EIB money will also help tofacilitate the production of a newsmall, advanced-technology petrolengine, with low fuel consumption.It is envisaged that expanded pro-duction capacity will represent anannual output of up to 300,000 vehi-cles and 300,000 engines.

The EIB has also approved – inprinciple – a loan of EUR 200 mil-lion that will finance research, de-velopment and innovation for thedevelopment of vehicles and en-gines to be manufactured in theCraiova plant. However, these ac-tivities will be carried out in Ford’sfacilities located mainly in Ger-many.

Dana Ciuraru

... while BCR lendsEBRD funds to smEs AIG Life Asigurari Romania has

been rebranded as Alico Asigurari Ro-mania, taking over the majority stake-holder’s name, American Life InsuranceCompany (Alico). The change affectsonly the signage and branding; the struc-ture of the company, management teamand strategy will remain unchanged.Within the business profile, the structureand specialization in life insurance, es-pecially on guaranteed products, finan-cial and investment strategy, productportfolio, distribution channels and theway the business is managed will alsostay the same. Along with the namechange, AIG Fond de Pensii will also be-come Alico Societate de Administrare aunui Fond de Pensii Administrat Privat.It too will maintain its organizationalstructure, team management and marketstrategy.

Anda Dragan

AIG Life AsigurariRomania becomes AlicoAsigurari Romania

CO

URTEsy

OF FO

R5d

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

Week in

nUmBERs

Carmaker Ford has upped its

investment plan in Romania from

EUR 675 million to EUR 1.2 bil-

lion

1.2 billion

Around 12 percent of adminis-

tration councilors in Romania are

women, which is above the

European average of 9.7 percent

12%

The World Bank forecasts an

economic increase of 0.5 percent

in Romania this year

0.5 %

The average monthly salary in

Romania was RON 1,366 last

year, according to recently

released statistics

1,366

Bank payments dropped by 30

percent last year in Romania.

compared to the previous year

30%

As many as 2,650 employees of

state-owned energy companies

face the axe this year

2,650

European Investment Bank lendsFord Romania EUR 400 million...

n E w s

BUSINESS REVIEW / January 25 - 31, 2010 5

The International Finance Corpo-ration (IFC) plans to invest up toEUR 100 million to buy up nonper-forming loans in Central and EasternEurope, working alongside VardePartners LP, a specialized distresseddebt and asset firm. The proposedco-investment project, which couldsee up to EUR 450 million invested,aims to help local economies recoverfrom the crisis by addressing theproblem of bad debts and troubledassets.

The project aims to ensure thatbanks in these emerging markets areable to continue to provide financingto businesses and credit to con-sumers, boosting economic activityand creating more jobs. The project

will also contribute to developing atransparent market for distressed as-sets, improving market efficiency,according to the IFC.

“Eastern Europe is one of the re-gions most severely affected by thefinancial crisis, leading to a dramaticincrease in bad bank loans. By in-vesting in these bad loans, we canhelp banks redeploy their assets backinto the economy, giving a boost toeconomic recovery and job cre-ation,” said Lars Thunell, IFC execu-tive vice-president and CEO.

So far, none of the local or for-eign lenders working in Romania hasmade public the volume of their tox-ic assets.

Corina Saceanu

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

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

The International MonetaryFund, which has a delegation in Ro-mania until January 27 to review thecountry’s bailout loan, could makecertain changes to the additional let-ter to the initial agreement, followingits current evaluation, according toJeffrey Franks, head of the IMF eval-uation mission in Romania. Howev-er, they will not be dramatic, headded. “These are not radical initia-tives, but we continue to evaluate the

needs and the means to solve theseneeds. We are looking at the imple-mentation and changes to somemeasures, if they are needed, but weare also looking at the areas whereprogress was made,” said Franks.“This doesn't mean we will modifythe targets,” he added, saying thiswas the normal procedure.

His statement comes after theRomanian finance minister Sebast-ian Vladescu said the authorities

were negotiating changes in thestand-by agreement with the IMF,adding that he had already received adocument with proposed measuresfrom the fund.

The IMF mission currently inRomania is making the second andthird revision of the IMF bailoutloan, which should result in a furtherEUR 2.3 billion for the country. Thefund said it would probably releasethe funds to Romania even thoughthe country had failed to meet its pro-posed inflation target for last year.The annual rate of inflation was 4.7percent last year, above the proposedCentral Bank (BNR) target.

The IMF has set an ambitious re-form agenda for Romania this year,said Franks. “I am optimistic we canmake significant progress in 2010and that when the crisis is over, theeconomy will be ready to rebound,”said Franks. He added that the stand-by agreement with Romania wasnever in danger of being canceled,but only needed to be delayed due tothe elections. 2010 will be a year ofeconomic revival, said Franks, andRomania could be a success story, heconcluded.

Corina Saceanu

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

world Bank improvesGDP growth projectionfor Romania

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

The World Bank has increased

its projection of GDP growth in Ro-

mania 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 ex-

pects a current account deficit of 4.9

percent for this year and 5.5 percent

next year, which is below the previ-

ous 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 hav-

ing contracted by 2.2 percent last

year.

The World Bank is contributing

to a EUR 20 billion lending package

for Romania, along with the Inter-

national Monetary Fund (IMF), the

European Union and the European

Bank for Reconstruction and Devel-

opment (EBRD).

Corina Saceanu

n E w s

BUSINESS REVIEW / January 25 - 31, 20106

The number of Central and East-ern Europeans able to save moneyfell throughout 2009, even thoughfour out of five people have accessto the banking system, according toa recent survey by GfK conductedin 13 countries in the region.

The penetration rate of bankingproducts is the highest regionally inSlovenia, at 100 percent, while Ro-mania is second to last, with a pene-tration rate of just 54 percent, aheadonly of Bulgaria.

People in CEE countries becameless able to save money during2009. In Bulgaria, only 6 percent ofthe public managed to put moneyaside, while Lithuania and Slovakia

did better, at 30 and 35 percent re-spectively, according to GfK. “Ingeneral, when money is available, itis spent rather than saved or invest-ed. This is obviously a result of thefinancial crisis which hit most Cen-tral and Eastern Europeans in2009,” said Alexander Zeh, teamleader of the financial survey withGfK CEE Group.

In Romania, the second mostpopular financial service is lending,while in other CEE countries, sav-ing products occupy the same posi-tion. Bank accounts are the mostcommonly used financial productacross the region.

Corina Saceanu

Fewer pennies put away for rainyday in CEE last year, survey finds

PricewaterhouseCoopers Roma-nia (PwC) has launched the internettools Taxonline.ro and ClickTVA.ro,two new web-based solutions thatexpand the PwC offer to online taxconsultancy services.

Taxonline.ro allows individualclients to access a wide range of in-formation in real time, including adaily update of the Official Gazette,daily reviews of the Romanian, Eu-ropean and international news andtax developments, as well as a sum-mary of the latest updates to the Ro-manian tax system. In addition, cus-tomers will be able to debate tax is-sues on the website’s forum, and putquestions to PwC tax and legal ex-perts.

The Big Four firm is also launch-ing Click VAT, a software solutionintended to give users access to de-

tails of new regulations and appro-

priate responses.

“In the current economic envi-

ronment, which continues to be

tough for the business sector, com-

panies should pay particular atten-

tion to the updates of the Fiscal

Code. They must find ways to opti-

mize their tax position and to main-

tain 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 Roma-

nia to offer online tax services, giv-

ing clients full 24/7 access to our

databases, our tax best practices and

our professional advice,” said Peter

de Ruiter, partner, tax and legal serv-

ices leader at PwC Romania.

Anda Dragan

Tax consultancy goes online Romanian internet and voice

provider Prime Telecom has boughtlocal competitor Net Vision Telecom,after working in collaboration withthe firm since 2008. The takeover andmerger, which took place in Decem-ber last year, was announced in theOfficial Gazette. The new entity willoperate as Prime Telecom, and willhave five individuals as shareholders,including two former members of theNet Vision management team andshareholding structures. The twofirms had announced their partnershipin November last year.

The companies under the PrimeTelecom brand were expected to posta EUR 10 million turnover by the endof last year, which would put themthird on their market, after GTS Tele-com and Euroweb, according to anannouncement from Prime Telecom.

“For 2009, we are targeting a 50percent increase in our turnover, witha clear target to become number oneon the market of alternative telecomoperators in Romania,” said MariusIonescu, head of sales and marketingat Prime Telecom.

This was not the only merger forPrime Telecom last year. The firm hasalso merged with Vip Net, another lo-cal internet service provider.

Prime Telecom has been workingon the local market since 2001 andruns 8,000 kilometers of optical fiberacross Romania and Bulgaria.

Net Vision Telecom was set up in2005, when it started supplying inter-net, data and voice services on opticalfiber. Vip Net was set up in 1991, andprovided data transfer and internetservices.

Staff

Prime Telecom completes merger with netVision Telecom

lAU

RENTiU

OBA

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Catalin Cretu, head of Visa in RomaniasTO

Ck

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E

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

Visa Europe sees doubledigit growth in Romania

Visa Europe announced lastweek another year of double digitgrowth in Romania for the financialyear 2009, as card uptake continues.According to the statistics, totaltransactions with Visa cards are up23.2 percent by number and 32 per-cent by value, while the number ofcards in circulation has increased by5.4 percent to 6.2 million.

The most significant change isin payment behavior at merchants.Romanian Visa cardholders spent43.5 percent more through thischannel, while the number of trans-actions rose by 42.5 percent. Theshare of retail sales using Visa cards

accounted for 2.2 percent of all per-sonal payments, meaning that EUR1 in every EUR 45 spent in Roma-nia was on a Visa card. In the report-ed year (June 2008-June 2009), 26percent of Visa transactions weremade at merchants, while the vol-ume spent in stores on Visa repre-sented 12 percent of the total spendon the cards. In 2008, transactions atmerchants made up 22.7 percent outof total transactions and 11.6 per-cent of total value. The averagetransaction value at POS remainsEUR 45, similar to the level regis-tered in 2008.

Anda Dragan

n E w s

BUSINESS REVIEW / January 25 - 31, 2010 7

More than half of Romaniancompanies believe the effects of thecrisis will be felt into 2011 and ex-pect further falls in their turnoversand cash levels, found a Horvath &Partners study on the effects of therecession on firms, conducted on 248managers from Germany, Austria,

Switzerland, Hungary and Romania. The strategy of Romanian firms

focuses on developing sales teamsand strengthening distribution chan-nels, while developing new regionalmarkets and repositioning them-selves in terms of pricing, accordingto the study. Liquidity management

issues, which were not a priority be-tween 2001 and 2008, have led topredictions of liquidity falls over thelong term for 70 percent of Roman-ian companies. The percentage is 55percent for German and Austrianfirms.

However, Romanians kept theirspirits up, with half of the inter-viewed companies saying that, de-spite decreasing sales, they were notin crisis. Measures planned by localbusinesses include an increase intransparency and improving moni-toring systems, while upping busi-ness volumes. Secondary measuresinclude stabilizing turnovers, reduc-ing costs and ensuring liquidities,found the Horvath & Partners survey.While managers acknowledge the ef-fects of the crisis and their impact,concrete measures are lacking. InRomania, 58 percent of the inter-viewed managers believe the reces-sion will last between one and twoyears.

Corina Saceanu

Romanian firms stay optimistic in face of slowrecovery, Horvath & Partners

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

BRIEFs

Sibex launcheS Stock

trading platform

é 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 compa-

nies and start listing bonds

issuances. it has also launched a

new product, a futures contract

linked to the dow Jones index.

n e w S

BUSINESS REVIEW / January 25 - 31, 20108

Media distribution and travel re-tailer HDS Inmedio, subsidiary ofLagardere Services, plans to open35 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, hav-ing entered the local market in2003.

“Although the retail and real es-tate markets have been affected bythe crisis, the expansion potentialfor our network in Romania is stillhigh. We estimate that we will openover 35 stores this year. Consideringthe potential at national level, theexpansion plans will continue in thenext two-three years,” said Jean LucChassigneux, general manager ofHDS Inmedio.

The chain’s network reached 50

stores in 2007 and doubled its size in 2008. Inmedio and Relay are visited by 1.4 million customers each month, according tothe firm.

HDS Inmedio is the Romaniansubsidiary of Lagardere Services, acompany which runs 4,000 stores in21 countries and posted a cumulatedturnover of EUR 3.5 billion in 2008.Lagardere Services’ portfolio in-cludes stores which run underbrands such as Relay, Virgin, In-medio and Payot.

In Romania, Relay shops are lo-cated in transit areas, such as air-ports, railway stations and metrostations, while Inmedio outlets op-erate in areas with high traffic, suchas shopping gallerias, business cen-ters and hotels.

Corina Saceanu

HDS Inmedio plans to add35 new stores in 2010

co

urtesy o

f in

med

io

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

The amount of companies goingout of business in 2010 could rise by15 to 20 percent on last year, whenRomania saw 19,000 such cases, ac-cording to Coface.

“The number of bankruptcies willcontinue to grow this year. Some ofthese will be transferred from 2009,because they haven’t been completeddue to the judiciary strike. So therewill be an increase in the first half ofthe year, after which we will see few-er bankruptcies in the second half,”said Cristian Ionescu, general manag-er of Coface for Romania, Bulgariaand Slovakia.

Many firms are on the brink ofbankruptcy but haven’t declared ityet, while others are asking for insol-vency to protect themselves fromtheir creditors, said Ionescu.

The number of bankruptcies in-creased by 30 percent last year on2008, according to data from Coface.The worst hit market segments thisyear will continue to be real estate, ITequipment distribution, the furniture

industry, textiles, as well as transportand retail.

The lack of bank financing wasone of the reasons for the slowdownin activity. Last year, around 75 per-cent of ongoing loan contracts sawmore than 90 days’ delay in repay-

ments, which was three times the fig-ure registered in 2008. The number ofpeople and companies with unpaidloans grew by 56 percent last year, to700,000 people at the end of Decem-ber last year.

Corina Saceanu

Bankruptcies could surge by 20percent this year, Coface says

lau

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oba

e

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

MRM launches newdivision, MRM Conectoo

MRM Worldwide Romania and

Conect Soft have launched a new divi-

sion within MRM, MRM Conectoo,

which will offer e-mail marketing serv-

ice 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 activi-

ties this year and 10 percent in 2011.

Following the integration of the e-

mail marketing division, MRM World-

Wide Romania now offers digital com-

munication services, web services, inter-

active 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, Master-

Card, Microsoft, Nescafe and Vodafone.

Conect Soft was founded in 2005 by en-

trepreneur Bogdan Iordache. It launched

Conectoo in 2007.

Otilia Haraga

C a l e n D a R / w H o ’ S n e w S

BUSINESS REVIEW / January 25 - 31, 2010 9

evenTS, BuSIneSS anD polITICal agenDaJaNuary 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 Eu-

ropean 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.

WHO’S NEWS

MIRCea TuRDean, 41, is the new

general director

of Farmec Cluj-

Napoca. He took

over from Mirela

Lupas, having pre-

viously held the po-

sition of technical production di-

rector. Turdean joined the compa-

ny in 1994 as a researcher. He is a

graduate of the chemical technolo-

gy faculty in Cluj-Napoca and of

the Open University Business

School in Great Britain.

TeoDoR CuCu is the new creative

strategy director of

FRANK Group. He

started his career

working for Ringier

and later joined Me-

diaPro, and in the

last eight years has amassed expe-

rience in advertising. Cucu previ-

ously worked for GMP Advertis-

ing as head of strategy, where he

was involved in various projects

that were nominated or awarded at

festivals such as Effie, Cannes Li-

ons, Epica, AdPrint, Golden Drum,

Sabre, and the European Excel-

lence Awards.

CaTalIn DoBRe was promoted to

group creative director at McCann

Erickson for the Vodafone con-

sumer account. He joined the

agency five years ago as copy-

writer and has subsequently

worked for clients such as Con-

nex/Vodafone, Cadbury Romania

(Kandia-Excelent), Fujitsu, Orkla

and the Romanian Lottery. Dobre

graduated from the University of

Bucharest, the Faculty of Philoso-

phy, in 2006.

CRISTIan DRagoS will be appointed

the new CEO of GE

Money Romania

this month. He re-

places Ron Malak,

who has accepted a

new leadership role

within GE Capital Global Bank-

ing, outside Romania. Dragos has

11 years of experience in financial

services. He joined GE Money Ro-

mania in 2006 but has more than

five years’ experience within GE

as he worked for the company pre-

viously 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 Col-

lege (USA), as well as a licentiate

in aerospace engineering. Dragos

is also a Charted Financial Analyst

(CFA).

SIlvIu ISpaS, managing director of

ARBOmedia.net and EMI Roma-

nia, 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 ARBO-

media Group. Until a future deci-

sion is taken, all his operational re-

sponsibilities will be taken over by

Thomas Landolt, president of the

board of ARBOmedia AG.

FIlIp SToICa was elected the new

president of the Na-

tional Association

of Romanian Val-

uers (ANEVAR) af-

ter Adrian Vascu,

the former presi-

dent, 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 Ac-

countants and Licensed Account-

ants in Romania (CECCAR), a fi-

nancial auditor and member of the

Romanian Chamber of Financial

Auditors (CAFR) and a fiscal con-

sultant 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 editorial@business-review.ro

Law firm White & Case has ap-pointed Delia Pachiu as executivepartner of its Bucharest office, fol-lowing the departure of Todd Shol-lenbarger, the firm has announced.Pachiu has been part of the manage-ment team since the White & CaseBucharest office was established in2008, with Shollenbarger at thehelm.

She will be responsible for further strengthening the firm’s lo-cal presence and building the of-fice’s client portfolio by focusing on its core strengths in M&A, bank-ing & finance, and energy & utili-ties.

Qualified in Romanian law,

Pachiu has over 15 years of experi-

ence in advising multinational and

local companies, financial institu-

tions 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 Shol-

lenbarger have commented on the

reasons for the latter’s departure.

Corina Saceanu

Romanian to lead white & Caseoffice after expat departure

T a x E s

BUSINESS REVIEW / January 25 - 31, 201010

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

forward their own solutions for how

to revive the Romanian economy.

Dana Ciuraru

In the first few weeks of thisyear, the public debate has focusedon the possible introduction of newtaxes, on wealth, fast food, and thereplacement of the minimum taxwith a flat tax.

Cited by the media as the font ofthese proposed new laws, the Fi-nance Ministry dismissed the specu-lation and told Business Review thatsuch initiatives come from othersources.

“I have said, ever since the firstday when I was appointed financeminister, that the system of taxesand duties will remain unchangedthis year, except for the transforma-

tion of the minimum tax into a flattax, for those economic areas with ahigh potential for tax evasion. Allother discussion of a fast food tax,property tax and other issues wasnot generated by the Finance Min-istry, but by MPs and members ofthe government,” finance ministerSebastian Vladescu told BR.

Fiscal Fixing

Regardless of where these newtax ideas originated, they have be-come serious possibilities. BusinessReview asked some prominent taxspecialists to mull them over.

According to Mark Gibbins,head of taxation at KPMG in Roma-nia, the idea of taxing property at its

market value makes sense, at leastin theory, but he believes that inpractice it could be difficult to ap-ply.

“Property values have fluctuatedwildly over the last few years, risingseveral times between 2003 and2008, largely driven by a specula-tive boom, and then in many caseshalving in 2009. It is still too earlyto say what the true value of proper-ty should be, so it would be easiersaid than done to bring property tax-es in line with current market val-ues. In any case, the Fiscal Code al-ready requires properties to havebeen valued in the last three years,”Gibbins told BR.

Another difficulty the KPMG

expert foresees is that many citizenswhose house or apartment has risenin value over the last few years stillhave very low incomes, and the in-crease in the value of their propertyhas made no difference to their stan-dard of living. Such people could bebadly hit by a substantial rise intheir property tax.

“A further problem is that prop-erty taxes for legal entities in Roma-nia are much higher than in mostother countries in the region, whichacts as a disincentive to investment.So if property taxes are to bebrought into line with market val-ues, local taxes for legal entitiesshould also be reformed, so that Ro-mania’s levels are competitive withthose in neighboring countries,” headded.

Turning to the suggested wealthtax, KPMG Romania’s head of tax-ation says that it is similar to the onelevied in France, fashionable in the1970s, which was found to make lit-tle difference to budget revenues,and sometimes even to dent them,because it encouraged tax evasion,or the transfer of assets out of thecountry.

On the matter of the flat taxmodifications, the Ministry of Fi-nance has indeed initiated discus-sions to replace the minimum tax(payable by all taxpayers, withsome exceptions) with a flat tax,which will be paid only by certaintaxpayers, such as hotels, travelagencies, gyms, cosmetic centers,etc.

“This flat tax will be paid bythose taxpayers that provide directservices to the public, active in eco-nomic areas where it is presumedthat companies do not issue tax re-ceipts for all transactions,” RodicaSegarceanu, partner at Deloitte taxand head of the international & cor-porate tax team, told BR.

In recent months there has alsobeen considerable debate about mi-cro-enterprises, following the intro-duction of the minimum tax lastyear. In 2010, the turnover taxregime for micro-enterprises is also

stockexchange

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

Experts grapple with a taxingconundrum

T a x E s

BUSINESS REVIEW / January 25 - 31, 2010 11

due to end, with such concerns be-coming subject to profit tax at 16percent said Gibbins.

Some analysts support thismeasure, arguing that many micro-enterprises are simply structureswhich have been set up to reducetax and social contributions (thepractice of using micro-enterprisesas an alternative to employmentcontracts is widespread). However,any changes to the regime for mi-cro-enterprises should take into ac-count the needs of those which aregenuine and the risk to the economyif significant numbers of small busi-nesses face a much higher tax bur-den.

stopping cheats pros-

pering

Tax specialists say that those af-fected by the introduction of suchtaxes or duties will be, obviously,taxpayers, estimating that the state budget will win in the shortterm.

Miruna Enache, tax senior man-ager with the tax advisory & com-pliance department at Ernst &Young, told Business Review thatthe introduction of these new taxeswill also damage the fundamentalprinciples of taxation, like the fairtaxation principle and the neutralityof fiscal measures.

According to Deloitte special-ists, the introduction of the new flattax could have positive effects fortaxpayers who do not fall within thescope of this levy.

“It would eliminate unfair com-petition, as paying less tax allowssome to get away with charginglower prices and so should beclamped down upon. For clarifica-tion, this would be possible if alltransactions were recorded, as isdone by those taxpayers who con-duct their business fairly,” saidSegarceanu. But the manager doesnot see the mooted changes as apanacea. “Bottom line, I do notthink that the introduction of newtaxes will bring the economy on thepath of normality. Taking into ac-count the new economic circum-stances, key measures should be in-troducing facilities, staging, and thereductions of penalties, reducingfrom 0.1 percent to 0.02 percent thepenalty per day of delay, accordingto bank interest rates.”

taxation experts

propose measures to

revive economy

Mark Gibbins emphasizes that

all tax measures should be consid-ered not only in terms of their im-pact on state coffers, but also theireffect on the economy.

He cautions that raising taxesmight seem appealing as a way toreduce the budget deficit, but inpractice it could be counter-produc-tive, because it could reduce indi-vidual spending, hurt businessesand deepen the recession, with acorresponding negative impact onbudget revenue.

But one step the governmentshould definitely take is to make taxcollection more efficient. There is alarge underground economy, and thetax authorities should take activemeasures to combat fiscal evasion.

Predictability of legislation is al-so important. In recent years, Roma-nia’s tax legislation has beenchanged frequently, often at veryshort notice.

In theory, according to Article 4of the Fiscal Code, changes shouldbe made only by a law (and not oth-er forms of legislation), should takeeffect only from 1 January of thefollowing year and “as a rule” beannounced six months before takingeffect.

In practice these provisions areroutinely disregarded, with manychanges being made by GovernmentEmergency Ordinance, in the mid-dle of the tax year, with little warn-ing.

This lack of predictability is badfor business, because it makes for-ward planning difficult. Being ableto plan ahead is even more criticalduring a recession, when money istight. A real effort by the govern-ment to promote stable and consis-tent fiscal legislation could providea boost to the economy.

In addition, the governmentcould help the recovery by issuing acoherent package, based on certainindustries which it wants to pro-mote.

The Ernst & Young senior taxmanager goes even further, propos-ing some practical measures such astax exemption for sums held by tax-payers in accounts abroad and usedfor economic activities in Romania(encouraging the flow of liquidity tothe country), a VAT increase, or re-ducing payroll taxes and social con-tributions of employees.

It may matter less who came upwith these suggestions than whomakes the first step towards actual-ly helping the economy return tonormality.dana.ciuraru@business-review.ro

m o n e y

BUSINESS REVIEW / January 25 - 31, 201012

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 business-people will sell their company,and hope that doing so will leavethem with a nest egg. But any exitneeds to be carefully planned, es-pecially now that the currentdownturn has hit almost all eco-nomic sectors. On top of this, thecrisis is making it increasingly dif-ficult for owners to sell their com-panies at the prices they hadhoped for. A proper strategy in-volves being in control of thebusiness, having clear goals, beingfocused on them and having a planfor a profitable exit.

But what happens when an en-trepreneur decides to sell his orher business in a downturn? Isnow the right moment for such amove or would it be better to holdoff until Romania emerges fromthe recession? Many specialistsrecommend that owners sell nowonly if they are forced to do so bythe current economic woes. If itdoes come to this, what should theseller expect?

“An entrepreneur selling theirbusiness now will get a price thatis two or even three times lowerthan before the crisis, dependingon the type of business and field ofactivity,” says Valeriu Nistor,

managing partner at SOAR Man-agement si Investitii. From thisperspective, it clearly makes sensefor an entrepreneur to hold ontotheir business until the crisis pass-es if they want to get a reasonableprice for it. According to Nistor,sale prices will return to a levelcomparable with those posted in2007 and 2008 in the next two-three years.

But Andrei Iordache, consult-ant at Visionwise, is slightly morepessimistic regarding any such re-covery. “Prior to this economicslump we had the so-called roar-ing 2000s. Those times, togetherwith the huge EBITDA multiples,will only return when the nextbubble comes. Taking into ac-count the economic history andhuman nature, I see this being infive to ten years. However, Iwould not take this estimate to thebank or the private equity fund,”says the consultant.

In his opinion, for the past fewyears entrepreneurs have been

bargaining for so-called price pre-miums. “This means that after es-tablishing a baseline price for aspecific company, both partiesspent a lot of time haggling overthe monetary values of ‘marketleadership’, ‘liquidity’ and otherenhancements added to the com-pany for sale,” says Iordache. Hesays that now, entrepreneurs aretending to get offers limited to thefair value of the company. “This isbecause the opportunity cost ofmoney has skyrocketed in the lastyear.”

Iordache underlines that pricesare volatile and specific to eachtransaction. Furthermore, regard-less of the price offered by privateequity funds, entrepreneurs shoulddo their own calculations and con-sider the following questions be-fore making a final decision: Canthe company survive without acash or equity injection? Do I per-sonally need the money rightnow.? “If one answers no to thefirst question and yes to the sec-

ond, than any deal is better than nodeal at all,” says Iordache. “Thisbasically means that if an entre-preneur is on the hunt for a goodprice, I would advise him or her towait. If the decision to sell is aboutthe future of the company or tomeet a pressing need for personalcash, than a transaction is due,”adds the consultant.

Of course, selling a businessalso requires willing buyers, ofwhom there are few in an econom-ic downturn. This is the case notonly in Romania, but also on oth-er, mature markets. At internation-al level, the number of small busi-nesses sold fell 36 percent in thefirst quarter of 2009, compared toa year earlier, according to themarketplace for buying and sell-ing small companies, BizBuy-Sell.com. Even if buyers’ interestis piqued, most don’t have thecash they had a year ago. Plus, theavailability of capital from lendersor any other financial institutionsis still restricted.

Any entrepreneur who decidesto sell their business needs to con-sider that the uncertainty of theeconomy is playing an importantrole in reducing the volume ofsales. According to experts, therule that sellers should take threeyears of a company’s financial sit-uation into account when setting apurchase price and calculatinghow much cash they expect abusiness to generate, currentlydoes not apply.

As for likely purchase targets,Iordache says that market leaderscould still be courted by privateinvestors and even banks. “Iwould also recommend entrepre-neurs embrace the trend towardsconsolidation which has started incertain industries such as special-ized retailing – shoes, pharmaceu-ticals and telecom,” says the com-mentator.

It is clear that anyone withcash to splash at present has agreat opportunity to buy muchmore cheaply than in the past and,as a result, to gain market share orenter a new business segment. Themarket offers a wide range ofways to acquire companies thatare forced to sell rather than go in-to liquidation, which could makeit a seller’s market.

stockexchange

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

Cash is king as market misery drives sales

BUSINESS REVIEW / January 25 - 31, 201014

P R O P E R T Y

Real estate developer CenterraCapital Partners, which will soonstart working on its Coresi Shop-ping City project in Brasov, is alsoplanning a retail project forTimisoara, where it owns 23hectares of land.

The developer, owned by invest-ment fund Chayne Capital, is plan-ning to build a retail park with45,000 sqm of GLA under the nameTimisoara South Gate at the city ex-it to Belgrade. The project, whichwill be developed in phases, hasbroken ground with a first openingscheduled for 2011, according to thecompany.

Meanwhile, Centerra CapitalPartners is planning to start workingon its shopping center in Brasov,which will be built on the premisesof the former Tractorul factory. Theproject will require EUR 110 mil-lion in total and will be built in twophases.

The first will comprise 45,000sqm of retail, out of which 10,500sqm will be occupied by an Auchanhypermarket.

The remainder of the projectwill include a shopping galleria, aDIY center, a furniture store and asports shop.

The second stage of the project,representing another 40,000 sqm ofretail, will include 150 stores, coffeeshops, restaurants and a multiplexcinema.

Coresi Shopping City will openin 2011. The developer hopes tofund the investment through its own resources, while still pursuingalternative banking financing op-tions.

An office area will be added to

The European Investment Bank(EIB) could lend up to EUR 80 mil-lion to logistics developer Ware-houses De Pauw, fueling the estab-lishment of four logistics centers inRomania, according to a recent EIBannouncement. The four projects,which come with a total investmentcost of EUR 200 million, would bebuilt close to Bucharest, in CorbiiMari and Fundulea, while a thirdand a fourth unit will be locatedclose to Ploiesti and Pitesti, respec-tively. The lending is under consid-eration by the EIB.

WDP, which is listed on theBrussels and Paris stock exchanges,builds and rents warehouses in Bel-gium, the Netherlands, the CzechRepublic, France and Romania.

“In 2008 and 2009 WDP ob-tained the required PUZ permits inphases for the various sites in Ro-mania. The company has decidedfor the time being not to start any

projects involving risk here, and toconcentrate on the construction ofproperties that have been pre-let.Consultations are currently ongoingwith potential lessees to considerwhether customized projects can bestarted up in the course of 2009,”WDP wrote in its most recent annu-al report. “This will be undertakenvia WDP Development RO, in a51:49 joint venture with the entre-preneur and specialist for Romania,Jeroen Biermans,” added the com-pany.

Last year the company started ashare issuance, which resulted inEUR 37 million of additional capitalraised for ongoing projects.

“These will comprise pre-letown developments or acquisitionsof one or more premium-qualitysites in Belgium, France, theNetherlands or Romania,” the com-pany has said.

Corina Saceanu

Centerra to start work on Brasov project,

plans retail project in Timisoara

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

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the retail element, comprising some125,000 sqm of office space in total.The existing buildings on the formerTractorul premises, some 15,000sqm, have already been partially re-vamped by Centerra, which leased7,000 sqm of the area to companiessuch as Computer Generated Sys-tem (CGS), IBM, Freudenberg andFresenius Medical.

Centerra Capital Partners, whichbought the former Tractorul plat-form in 2007 for EUR 77 million,was set up in 2006. Before gettinginvolved in development with theBrasov and Timisoara projects, it al-so bought a 20th century villa inBucharest, which was resold in2008 to a retailer.

Centerra was founded by twoRomanian private equity profes-sionals, Victor Vadaneaux and Sil-viu Savin, both with investment ex-perience and track records in West-ern European buyout and venturecapital transactions.

In the future, the firm intends tooffer property development andmanagement services to third partyproperty owners on a selective ba-sis. Plans also include capitalizingon its private equity experience inWestern Europe to make private eq-uity investments, an untapped seg-ment considering Romania’s long-term economic growth prospects.

Cheyne Capital manages USD 6billion of assets, coming from bluechip institutional investors such aspension funds and insurance com-panies, as well as investment officesof high-net-worth Western Euro-pean and Asian families, accordingto the company.

Corina Saceanu

Monte Carlo Palace 70 percent sold, owner wants

to promote Monaco properties in Romania

Real estate developer MarvelGroup has sold 70 percent of resi-dential project Monte Carlo Palace,which was completed back in 2008,the company has announced. Theproject was built on a 5,000-sqm

Warehouses De Pauw in frame for EUR 80

mln EIB loan for Romanian warehouses

The block is near Herastrau Park

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land plot in north Bucharest, closeto Herastrau Park, and required aninvestment of EUR 18 million.

The 14-floored project featuresapartments with prices betweenEUR 120,000 and EUR 800,000.The developer has decided to rentthe remaining of unsold apartments,with rents ranging from EUR 900for studios, to EUR 1,500 a monthfor three-roomed units, according toEdward Popescu, general managerof the project.

The developing company isowned by Romanian-born business-man Christian Popescu, who hasbeen living in Monaco for the last17 years. He is also the owner ofGalerie Vendome Palace, a mixedproject which will feature a five-star-plus hotel and a commercialgalleria, to be opened in Bucharestin 2012. Galerie Vendome Palacewill be located close to Calea Victo-riei and works on this project shouldstart in April this year.

Investor Popescu plans to pro-mote Monaco properties in Roma-nia through John Taylor, DTZ andColdwell Banker, according to thefirm.

Corina Saceanu

BUSINESS REVIEW / January 25 - 31, 2010 15

P R O P E R T Y

Real estate agency DTZ Echinoxhas been appointed by Argo Real Es-

Pepsi Americas has agreed to sell an11,000-sqm land plot in south Bucharestto discount retailer Lidl, which will builda store there, according to an announce-ment published recently in the OfficialGazette. The sale price will be EUR 285for sqm, which puts the total land priceat EUR 3.1 million.

The site previously hosted PepsiAmerica’s warehouses. They weremoved to its new production facility inDragomiresti Vale, which opened in

Antalis Romania has leased10,000 sqm of warehouse and officespace in Bucharest West Light Indus-trial Park, developed by Portland Truston the A1 highway.

This is the first big lease deal of2010 and comes after a flat year interms of leasing contracts for the localreal estate market. The new warehousespace consolidates logistics opera-tions, previously run by Antalis fromtwo different locations situated in thesame industrial park.

“This move is an important onegiven the current economic circum-stances and will be reflected in thequality of the services offered to ourcustomers, as it will increase the effi-ciency of processing orders from re-ceipt to delivery to the customer. This year we also plan to developthe new packaging division and to

extend the range of products for the advertising industry. The newlocation will provide the extra space needed,” said Lorett Mincu, managing director at AntalisRomania.

Antalis, which distributes commu-nication support materials, is ownedby the French financial group Sequa-na. The lease was part of an integra-tion strategy started one year ago,when Antalis Romania took over MapMerchant Romania, a player on thepaper market. The two companies re-ported a combined turnover of EUR35 million at the end of 2008. This isnot Antalis Romania’s first leasingtransaction. In 2009 the company relo-cated its offices to a building with asurface of over 1,100 sqm in the Uniriiarea of downtown Bucharest.

Staff

DTZ Echinox wins Shopping City Sibiu

and Suceava management contracts

Shopping City Suceava has 48,000 sqm of GLA

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tate to handle the property manage-ment of Shopping City Suceava andShopping City Sibiu. The new con-tracts triple the size of DTZ’s proper-ty management portfolio, accordingto the company. The two projects to-gether reach 130,000 sqm of GLA.

Shopping City Sibiu, some 80,000sqm of GLA, was opened in Novem-ber 2006 and extended in 2007. It isanchored by Real Hypermarket, Car-refour, Baumax DIY and MediaGalaxy, among others.

Shopping City Suceava has48,000 sqm of GLA.

Anchors include outlets of leadinginternational retailers, such as a Car-refour hypermarket and a Mobexpertfurniture superstore.

DTZ Echinox’s property manage-ment department manages 59,000sqm of retail space in Iris ShoppingCenter and Macromall Brasov, as wellalmost 11,000 sqm of office buildings– EvoCenter One and Baneasa Busi-ness Center, owned by Black SeaGlobal Properties.

Corina Saceanu

Lidl to buy land plot in capital from Pepsi

Americas

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

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September last year. Lidl has been activein Romania for several years, duringwhich time it has acquired various plotsof land, but has yet to open its first storein the country. The retailer is also work-ing on a warehouse and offices in Chia-jna, which should be completed thisyear, according to previous information.Lidl is part of the Lidl & SchwartzGroup, which operates discount hyper-market chain Kaufland in Romania.

Staff

Antalis leases 10,000 sqm in Portland

Trust’s Bucharest West warehouse project

e N t R e P R e N e u R

BUSINESS REVIEW / January 25 - 31, 201016

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

Beauty can be found in almost anybusiness, due to each one’s distinctive-ness, the challenges it poses and the re-wards it offers the entrepreneur behindthe figures. But when that business isselling flowers, the beauty is more ob-vious to the naked eye. The current cri-sis has not caused every company towilt, with one such example beingDutch firm Bakker, which specializesin trading flower bulbs. It entered thelocal market in the fall of 2007, initial-ly operating through a local representa-tive. But the business bloomed quicklyafter its entrance, and Gradina BakkerOlanda was established in Romania atthe beginning of 2009. The 100 percentDutch company is the sole holder of therights to trade Bakker products on thelocal market. But why did it make themove, when the first signs of the crisiswere already sprouting in Romania?

The answer is simple: with Roma-nia and other countries’ accession to theEU, the company wanted to benefitfrom the great potential that these mar-kets offer. Another significant reasonfor trying to penetrate the local marketwas that Romanians are keen garden-ers.

But the local competition is fierce,and breaking into the flower market isno mean feat. “Our competition comesmostly from the retail sector, meaninggarden centers. However, we can offera much wider range of products, and ofhigher quality, thanks to our high-endproduction facility in Holland,” saysRobert Jan Prick, general manager ofGradina Bakker Olanda. In his opinionthe firm’s array of products is one of themain competitive advantages it hasover other players on the market.

The business model is quite simple:a customer can order from the productcatalogue by post, phone or fax, andcollects their parcel from the nearestpost office. Prick says that he can’t gen-eralize too much about the type of cus-tomers that use Gradina Bakker Olan-da’s services, but that potential buyersare familiar with mail order. “Oncepeople discover the ease of home deliv-ery, they usually remain loyal.”

The cost of the bulbs depends onthe type of plant. “Sometimes we sellfive or ten plain flower bulbs for a dis-count price of RON 20, or at the highend of the scale 25 trees or hedges. Thelatter can cost up to RON 600,” saysPrick. There are also additional servic-es: a guarantee of up to five years onperennials and one for all bulbs; cus-tomer care; and extra information aboutplants. The company also offers consul-

tancy services for its VIP customers onhow to landscape their garden. Theseadditional services are essential in thecurrent climate, because simply sellinga product is no longer enough to keepyour customers. Most – but not all – ofthe company’s products come from theNetherlands. Some roses come fromItaly and even as far afield as Kenya.

As for delivery, the company cando it only when weather conditions per-mit, both in the Netherlands and Roma-nia. The firm also lets its customerschoose when they want to receive theirparcel. “If the customer orders in sea-son and wants the order direct, we de-liver it within seven working days,”says Prick.

But even this business is not all ros-es. Prick has had trouble convincingnew customers that the ease of homedelivery can be combined with the high

quality of the Dutch bulbs. “Many peo-ple do not think it possible, until theyexperience it themselves for the firsttime,” says the general manager. Themost difficult point in setting up thebusiness was surmounting Romanians’lack of familiarity with mail order com-panies, as well as getting the distribu-tors to deliver the parcels within the de-sired timeframe, and for a reasonablecost. “Our relationship with the Ro-manian Post has improved significantlyafter two years of collaboration, be-cause we have come to understand eachother’s needs and restrictions better,”says Prick.

At the moment, Gradina BakkerOlanda remains a mail order specialist.“But our competitors are looking to ex-pand and will enter onto the local mar-ket,” says Prick. This could present abig challenge for the company in theyears to come. However, Bakker is nowpresent in twenty European countries,with a market share between 50 and100 percent.

In future, the general manager saysthat the company has expansion in allEU countries on its agenda. “We arecurrently improving our productionprocess, which should make it possibleto penetrate large markets such as Rus-sia and Ukraine in the years to come,”says Prick. He adds that the companydoes not intend to extend throughout afranchise system because “we have hadsome experiences with joint venturesand they were not always successful.”

The current crisis is temporarilyputting a brake on Bakker’s growth butPrick remains optimistic: “I expect that2010 will be another difficult year, butI also think that our current strategy,which combines an assertive marketingapproach with very good after salesservices, is proving to work.”

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

Flower power sees profits bloom

é Global turnover in 2009: EUR150 million

é Predicted global turnover growthin 2010: 2-3 percent

é Number of employees in Roma-nia: 6 (not including marketingstaff)

é Countries present: Romania,Belgium, Luxembourg, France,Italy, Switzerland, Austria,Czech Republic, Slovenia, Ger-many, Denmark, Sweden, Nor-way, Great Britain and theNetherlands

Bakker

R e T A i l

BUSINESS REVIEW / January 25 - 31, 201018

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

and not at the same pace as two or

three years ago.

Corina Saceanu

Modern retail covers 43 percent ofthe local consumption market, with hy-permarket and discounter stores beingthe most dynamic formats. While intheir glory days, two years ago, hyper-market operators were announcing plansto rapidly increase their network ofstores in Romania, piggybacking on theboom in the real estate market, theirstrategies have changed. Openings areweighed up carefully. Money is nolonger so readily available and comeswith higher costs, while suitable real es-tate projects are thin on the ground. Thisadds to the less than rosy expectationsover any consumption increase in Ro-mania over the next two years. Apartfrom being reticent about new openings,fast moving consumer goods (FMCG)retailers are also cautious in announcingtheir expansion plans. French giant Car-refour is taking a silenzio stampa ap-proach to its extension hopes, after fo-cusing almost exclusively on its super-market format last year.

Metro Cash & Carry, the biggest re-tailer in Romania turnover wise, is be-having similarly. It has only recently an-nounced its plans to open a new cash &carry unit in Bucharest this year, withoutmentioning the exact location or projectwithin which it could be included.

French retailer Auchan is however

more open to disclosing its expansionplans. “This year we will open a store inConstanta and in 2011 one in Brasov, aspart of the Coresi Shopping City proj-ect,” Patrick Espasa, general manager ofAuchan Romania, tells Business Re-view. These two are confirmed projects,but the retailer has some others close tobeing signed, among which is a “veryimportant one” in Bucharest, Espasa re-veals. In Constanta, Auchan will open astore in the Polus Center project.

The chain has two shops inBucharest and seven across the countryin total. Its plans are to double this net-work in the next three to five years. Withan average investment per store of EUR20 million, the seven new outlets shouldcost the retailer EUR 140 million by theend of the period.

“For the new units we are consider-ing Bucharest, as for us it is important tocover all important cities in Romaniaand expand even more in the capital.Then comes the viability of the projectitself, the client traffic it could generateand the importance of the shopping cen-ter,” says Espasa. In Bucharest there arecurrently 17 hypermarkets and 8 cash &carry store units. One change in theFrench retailer’s strategy is its plan tobuy future stores, rather than just leasethe retail space from real estate develop-ers.

Auchan opens larger hypermarkets,as does Cora. Store sizes are around15,000 sqm, while for example the Car-refour branch that opened last year inEra Shopping Park Oradea covered9,000 sqm. Cora however has had theslowest expansion pace. It entered thelocal market in 2001, and after openingtwo branches in Bucharest, added a thirdin Cluj-Napoca in 2006, in which it in-vested EUR 20 million. This year it willopen its third store in Bucharest, withinthe Sun Plaza shopping center. Cora hasalso signed a leasing contract for 8,000sqm in Gold Plaza shopping center inBaia Mare, one of the few ongoing retailprojects.

Retailer Real, with three stores inBucharest out of a total of 24 in Roma-nia, has not announced expansion plansfor this year. The firm opened four storeslast year, following on from another sixin 2008.

Meanwhile, Kaufland’s smaller sizeand discount-oriented hypermarketswere more suited to expansion last yearand, based on the progress of 2009, thefirm could add some more units this yeartoo. The German retailer has aggressive-ly expanded since its 2005 market entryin Romania, having reached 45 hyper-markets across the country. In the firstthree months of this year, Kaufland willopen five or six more stores. The retail-

er’s typical investment in a store is aboutEUR 9 million.

One of Kaufland’s advantages forexpansion is the financing provided bythe European Bank for Reconstructionand Development (EBRD). The retailertook out a EUR 150 million loan fromthe EBRD mid last year, which shouldfuel its expansion with 20 stores acrossRomania and 13 in Bulgaria. Despite be-ing one of the most aggressive compa-nies in terms of expansion, Kaufland haskept a low profile in announcing any-thing strategy related.

The lack of suitable real estate proj-ects is one of the impediments to the ex-pansion of those retailers whose strategyis to open units within larger projects.Had all the projects which were an-nounced a couple of years ago beenstarted, retailers would now have had awider choice. Projects like ParklakePlaza, Mega Mall, Casa Radio andPromenada Mall in Bucharest have allbeen delayed. Meanwhile, some real es-tate developers are trying to shift to dif-ferent formats, after the shopping malland retail park options have already beentried out. Developer RED is planning anetwork of smaller shopping centers un-der the Cadran brand, across third tiertowns in Romania. The developer hasalready secured financing for a first suchproject in Husi, which will be anchoredby Penny Market. Such small projectshave room either for a discounter or asupermarket, which could be using theopportunity to expand across the coun-try.

This strategy follows an internation-al pattern, as turbulent economic condi-tions have led to a re-evaluation of chan-nel strategies by the world’s leading re-tailers, according to Planet Retail. Prox-imity retailing is poised for a boom,driven by the expansion of discountersand other small-box grocery outlets.

Looking specifically at the top 30global grocery retailers, the economicdownturn has led many to cut back onhypermarket openings due to a slump inconsumer spending and the relative costof operating big-box outlets, accordingto Planet Retail research.

“As capital expenditure budgets getsqueezed, resulting in a slowdownacross virtually all channels, it has be-come more important than ever for re-tailers and manufacturers to be sure theyare investing in winning formats and inthe winning regions,” said Natalie Berg,Planet Retail’s grocery research manag-er.

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Auchan is planning to open one store in Constanta in 2010 and another in Brasov the year after

FMCG retailers return to small, cautious steps

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BUSINESS REVIEW / January 25 - 31, 201020

The first concession contract to build

a highway in Romania was signed

last week, more than two years after

the idea was proposed. The 55-

kilometer 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 415-

kilometer Transylvania highway is

due to reach completion. After that,

Romania will have four highways,

totaling almost 800 kilometers,

similar to the amount that France

had 30 years ago.

Corina Saceanu

French construction companyVinci and Greek contractor Aktorhave signed the EUR 1.2 billion con-tract to build the Comarnic-Brasovhighway, which should be finishedwithin the next four years. The pairhave also won the concession con-tract to maintain the highway for an-other 26 years after it is finished. Thisis the first concession contract for thebuilding of a highway in Romania.For the ongoing Transylvania high-way project, construction company

Bechtel is in charge only of construc-tion works.

The Romanian state will spendEUR 4.8 billion on the Comarnic -Brasov project over the next 30 years,out of which the cost of the main loanwill be EUR 3.1 billion, the expensesinvolved in the subordinated loanEUR 670 million, and the cost of run-ning the highway EUR 323 million.Taxes and other financial costs willreach EUR 584 million, while infla-tion will add another EUR 146 mil-lion to the tab. The cost of operatingthe highway will however be higher,

and the remainder should come fromthe concession taxes.

Overall, the Romanian state willpay around EUR 87 million for eachkilometer of road. The constructioncost alone is EUR 21.8 million perkilometer, which, according to theMinistry of Transportation, is amongthe lowest in Europe. For compari-son, the price per kilometer of a sim-ilar highway in France was EUR 46million, and in the UK, EUR 32 mil-lion.

The 55-kilometer highway willbe built in a mountain area and will

have 16 bridges and viaducts, withfive main traffic nodes along the wayin Comarnic, Sinaia, Busteni, Predealand Rasnov. Out of the 55 kilometers,30 kilometers will be made up of tun-nels.

The two construction firms andtheir sister companies Vinci Conces-sion and Aktor Concession beat twoother consortia, which had also placedoffers, to the contract. The first wasmade up of Strabag, Egis Projects, Eu-rovia Construct International andHousing & Construction Holding,while the second involved Bilfinger

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

After rough ride, Romania takes theconcession route to build its highways

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BUSINESS REVIEW / January 25 - 31, 2010 21

Berger and Porr. The consortium ledby Strabag contested the result of thebid, which delayed the negotiationsstage and the signing of the contract bysix months, until November last year.

The winning consortium was rep-resented by local law firm PeliFilipand Linklaters, which have workedfor more than a year on the public ac-quisition project. Following the sign-ing of the deal, the consortium needsto find financing for the project, whilethey also have one year to completethe technical studies and draft thetechnical design. “We are interested toknow whether they can find financ-ing, as they could come and tell usthey are giving up. But we believethat since they are such a powerfulconsortium, they will find a solution.European Bank for Investments (EIB)representatives said they were inter-ested in covering some of it,” saidtransport minister Radu Berceanu.

Vinci Group posted a turnover ofover EUR 35 billion worldwide in2008, while its total investments inBucharest have exceeded EUR 450million. Aktor Concessions & Aktorare members of the Ellaktor group,which in 2008 had a consolidatedturnover of more than EUR 1.9 bil-lion.

It took six years from the signingof the contract for the first 42 kilome-ters of the Transylvania highway tobe completed in December last year.The deal was inked in 2004 but theproject was delayed due to a renego-tiation along the way and to expropri-ation issues. During the period, Ro-mania changed five ministers incharge of transportation. The 415-kilometer-long highway, which willconnect Brasov to Bors, in the westof Romania, close to the Hungarianborder, will be built at an average costof EUR 11 million per kilometer.

Romania currently has 261 kilo-meters of highway, according to theNational Highway Company(CNADNR), while the entire networkof roads in the country reaches200,000 kilometers. The proportion ofhighways out of the total road net-work is 0.13 percent, and will grow to0.4 percent when both the Comarnic-Brasov and Transylvania highwaysare finished.

By comparison, Germany’s inter-urban road network has a total lengthof more than 231,000 kilometers, outof which motorways make up around12,550 kilometers and federal high-ways around 40,700 kilometers.Highways make up 23 percent of thetotal length of roads in the country.

corina.saceanu@business-review.ro

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 Aus-

trian 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, organiz-

ers the Austrian Cultural Forum

have invited five jazz bands to de-

liver a musical program with the

saxophone and accordion.

Otilia Haraga

Green Hourshosts jazzgigs

Romania will participate in pro-grams within the EU poverty awarenesscampaign, as 2010 has been declared ayear in which poverty and ways to alle-viate it will come under scrutiny. Lastweek on January 21, the EuropeanCommission and the Spanish Presiden-cy of the European Union launched the

2010 European Year for CombatingPoverty and Social Exclusion. Theevent was launched with an inauguralconference in Madrid hosted by SpanishPrime Minister Jose Luis Zapatero andEuropean Commission President JoseManuel Barroso.

Almost 84 million Europeans – or

17 percent of people across the EU –currently live below the poverty line.The 2010 European Year aims to raiseawareness of the causes and conse-quences of poverty in Europe, bothamong key players such as govern-ments and social partners and amongthe public at large. It also aims to mobi-lize these different partners in the fightagainst poverty, promote social integra-tion and inclusion and encourage clearcommitments on drawing up EU andnational policies to tackle poverty andsocial exclusion.

The year’s activities will be largelydecentralized, with national programsdrawn up by each of the 29 countriestaking part (the 27 EU states plus Norway and Iceland). A EUR 17 mil-lion budget will support awareness-rais-ing campaigns at European and nation-al levels and hundreds of national proj-ects linked to the different national pri-orities.

Otilia Haraga

Eu poverty awareness campaign getslocal contribution

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

Recoil, the long-term musicalproject of former Depeche Modemember Alan Wilder, will arrive inRomania on April 2. SelectedEvents 2010 – A Strange Hour withAlan Wilder & Paul Kendall willtake place at FRONT | The ARKClub.

Wilder will launch the latest Re-coil album, Selected, in spring ofthis year. The release will be accom-panied by a promotional tour, the

first time Wilder has gone on theroad since he left the British outfit.The tour will include dates all overthe continent.

Tickets for the Bucharest legcost RON 75 and can be bought on-line from MyTicket.ro and Ticket-Point.ro as well as from the Divertanetwork, Muzica stores, Off theRecord, The Kitchen andFRONT/The Ark. The Recoil gig isbeing produced by One Event.

Wilder started Recoil in 1986while he was still a member of De-peche Mode. His first release underthe new project was EP 1+2, fol-lowed by the album Hydrology.

The artist then went on to re-lease Bloodline, a musical effort forwhich he teamed up with famousnames from the business such asMoby, Toni Hallyday (from Curve)and Douglas McCarthy (fromNitzer Ebb).

Following Wilder’s departurefrom Depeche Mode in 1995, he re-leased Unsound Methods, a 1997 al-bum with gospel and electro tinges,and then the critically acclaimedLiquid in 2000.

Otilia Haraga

Recoil comes to Romania

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Ex Depeche Mode man Alan Wilder

E V E n T S

BUSINESS REVIEW / January 25 - 31, 201022

Skal Club Romania has a new exec-utive board, which will be headed fromnow on by president Michele Meoni,CEO of Continental Hotels; honorarypast president Anthoni Kuhnen, presi-dent of AVCO Consulting; and vice-president Sonia Nastase, general manag-er of Hotel Howard Johnson GrandPlaza.

The board is changed once everytwo years through free elections.Skal In-ternational Bucharest is an organizationthat brings together all sectors of thetourism industry- hotels, tour operators,airlines, event organizers and relatedservices in the field of hospitality.

Skal Club Romania currently num-ber 76 members who meet 11 times ayear, on the second Thursday of eachmonth, except August. The associationdeclared that its main objective for thisnew mandate would be to set up new re-gional branches of Skal around Roma-nia, in the cities of Sibiu, Oradea,Brasov, Tirgu Mures, Constanta andSuceava.

Otilia Haraga

Skal Club Romania hasnew executive board

The latest film by Radu Mi-haileanu, a Romanian-Jewish direc-tor who left the country in 1980 andfinally settled in France, has gar-nered six nods for the prestigiousCesar Awards, the French equiva-lent of the Oscars. The Concert was

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 de-

nounce the Jewish members of the

orchestra and now works in the

same place as a janitor. In the

movie, he puts together a bogus or-

chestra from the theater, which

maintains it is the official represen-

tative 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, Mi-

haileanu says he has always felt

emotionally connected with Roma-

nia, and feels compelled to return to

his homeland repeatedly.

Otilia Haraga

Radu Mihaileanu gets sixCesar nominations

The Concert was part filmed in Romania

Romanian production If I Want toWhistle, I Whistle, from Florin Ser-ban, will premiere in country cinemasat the end of next month. The moviewas included in the Berlin Internation-al Film Festival, which takes placefrom February 11-21 and competesalongside another 25 productions suchas The Ghost Writer by director Ro-man Polanski and Shutter Island, thelatest Martin Scorsese.

The film is about love and the

teenage years, according to the direc-tor. It tells of Silviu, who spends fouryears in prison on the shores of theDanube. Just before his release, hefinds out that his mother has returnedhome from a long period in Italy andwants to take his little brother away.He has only five days to come up witha solution. He also falls in love with abeautiful sociology who comes to thepenitentiary as part of her course.

Otilia Haraga

Romanian production runsnext month on cinema screens

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

The seventh fundraising ballBurns Supper, which celebrates thebirth of Scottish poet Robert Burns,took place in Bucharest on January23 at the Intercontinental Hotel, inthe presence of the British ambassa-

dor, Robin Barnett.The ball was organized by the

foundation Light into Europe.Guests made donations in aid ofchildren and young people withsight and hearing problems.

Diplomats, business people andcelebrities joined in the party andenjoyed dances, bagpipes and Scot-tish specialties.

The proceeds from the eventwill be used by the Light into Eu-rope foundation to edit and printbooks in Braille and help the hun-dreds of local families caring forsomeone with hearing or sight defi-ciencies.

Romania’s more than 85,000blind or partially-sighted people and30,000 hearing-impaired adults arevulnerable to daily isolation and dis-crimination. There are also tens ofthousands of children with sight orhearing difficulties who study inspecial schools.

Most of these children are caredfor by their families and do not haveaccess to education adapted to theirspecific needs or the chance to seekemployment. In Romania, nine outof ten people with sensorial defi-ciencies depend exclusively on stateaid.

Otilia Haraga

Burns Supper raises funds for the sensory impaired

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