business review issue 13 2009

ANALYSISThe Economy Ministry is now planning two tofour national energy companies, instead of onelarge one, as it announced last year

See page 15

BUSINESS REVIEWROMANIA’S PREMIERE BUSINESS WEEKLY APRIL 13 - 19, 2009 / VOLUME 14, NUMBER 13

www.business-review.ro

REAL ESTATEThe local office of real estate consultancy firm JonesLang LaSalle expects similar business to 2008 andhas no plans to axe staff, says MD Charles Krick

See page 13

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The local hotel market has followed the worldwide downwardindustry trend, seeing room rates and occupancy fall. But hotelmanagers see a flicker of hope in the last quarter of this yearand the beginning of 2010

See pages 10-12

The local hotel market has followed the worldwide downwardindustry trend, seeing room rates and occupancy fall. But hotelmanagers see a flicker of hope in the last quarter of this yearand the beginning of 2010

See pages 10-12

ANALYSISThe new forfeiting tax could cause price increas-es for consumers and even more tax evasion,says Angela Rosca of TaxHouse

See page 9

PLENTY OF ROOM AT THE INN

PLENTY OF ROOM AT THE INN

LOCAL FIRM ROMSTRADE LANDS A EUR 140 MILLION LOAN FROM CREDIT SUISSE; SEE PAGE 4

BUSINESS REVIEW / April 13 - 19, 2009 3

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BUSINESS REVIEW / April 13 - 19, 20094

BRIEFSOTP CONSULTING ROMANIATO SEE PROFIT IN 2009é OTP Consulting Romania, theconsultancy arm of the OTP financialgroup, estimates it will reach aturnover of EUR 1 million in the nextthree years. In 2008, the firm’sturnover exceeded EUR 100,000,which it intends to raise to EUR325,000 by the end of 2009. So far,OTP Consulting Romania has threeregional offices and by September, itplans to open a local office in easternRomania.

CLAL EXITS LOCAL MARKETWITH EUR 3.6 MLN LOSSES é Israeli financial group Clal Grouphas sold its Romanian insurancesubsidiary to a consortium of localbusinessmen in a deal worth EUR500,000, resulting in EUR 3.6 millionlosses for the Israeli group. Clalinvested over USD 23 million in itsRomanian-based subsidiary, whichhas operated on the Romanianmarket since 2006. To keep the localsubsidiary, the group needed toinvest about another EUR 5 million in2009.

BCR ESTIMATES 20 PERCENTRISE IN COMPANY LOANS é Local bank BCR estimates it willincrease its credit portfolio on theSME segment by 20 percent in 2009on 2008, a similar increase as forthe corporate loans segment.Currently, the bank has 250,000customers registered as SMEs, 60percent of its corporate operationssegment.

EURO MEDIA GROUP EYESROMANIAN TV AND MOVIEMARKETé Euro Media Group, the mainprovider of television and movieservices in Europe, is interested in thelocal market, according to theMinistry of Communications andInformation Technology (MCTI).Ministry representatives have metEuro Media Group officials andtalked over a possible partnership, asthe Romanian market has becomemore interesting since the governmentapproved the broadband strategyand launched an analog-digitalstrategy.

Romanian company Romstradehas closed a EUR 140 million fi-nancing deal with Credit Suissewhich will be used to provide fi-nancing for the company's infra-structure projects. This is the largestfinancing deal sealed by a Roman-ian company since the beginning ofthe year and also the largest one

contracted by a construction compa-ny with infrastructure projects.

The EUR 140 million facilitywill allow Romstrade to buy prom-issory notes issued by the NationalHighways Company as payment forthe road construction and repairworks.

Reff & Associates, the law firm

affiliated to Deloitte Romania, as-sisted Romstrade as lead legal advi-sor in negotiating and closing thedeal, while Badea Clifford Chanceassisted the lender.

The Romanian company is plan-ning to reach a total of EUR 400million in signed financing deals.The firm has already received someof the money from Credit Suisseand should get up to EUR 90 mil-lion of it by the end of the year.

Romstrade, a construction com-pany owned by Nelu Iordache, alsothe owner of low cost carrier BlueAir, has EUR 600 million worth ofcontracts in the pipeline for the nextthree years.

Towards the end of last year, thefirm had around 1,100 staff and in2007 posted EUR 185 million inturnover.

Reff & Associates is currentlyworking on three other deals with atotal value of close to EUR 400 mil-lion, according to the company.

Corina Saceanu

The local subsidiary of Bank ofCyprus estimates it will double itsdeposits portfolio by the end of thisyear, while also increasing its loanportfolio.

“We estimate that we will growour loans portfolio by a double dig-it figure and double our depositsfrom the current EUR 100 million.In terms of profit, we will manage tokeep the same level as last year, ifnot exceed it,” said George Christo-forou, general manager of Bank ofCyprus in Romania.

The bank’s profit last year, its

first full year on the market, wasEUR 3 million, which was thelender’s first profit since enteringRomania in 2007.

The bank will continue to ex-pand in Romania, from its current11-branch network, by adding threemore units in the next two months.The local subsidiary receives fi-nancing, over EUR 1 billion on themedium and long term, from itsmother bank. Some of the loansgranted by the local subsidiary havebeen allocated to the mother bank'sportfolio.

The lender plans to restructuresome of the loans in its portfolio byamending the grace period and thematurity.

The mother group is present inRomania through Bank of Cyprusand Cyprus Leasing. Bank ofCyprus entered the Romanian mar-ket in 2007. Its initial investmentplan for 2009 reached EUR 20 mil-lion.

The bank currently has 500 re-tail customers, 100 corporate cus-tomers and 100 SME customers.

Corina Saceanu

The financing will fund the local company’s infrastructure projects

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Bank of Cyprus plans to double deposits portfolio by year-end

Local Romstrade lands EUR 140million financing from Credit Suisse

Rompetrol Downstream, the re-tail division of the RompetrolGroup, has completed a USD 16.3million investment in its first stationcontrol center, according to a state-ment from the company. RompetrolOperations Center (ROC) will su-pervise and manage the energy gi-ant’s fuel transport and distributionoperations in Romania, and will

oversee the operations of its gas sta-tion network.

Currently, ROC manages themobile gas stations Rompetrol Ex-pres. By the end of August, it willcomplete the system implementa-tion for partner Rompetrol stationsand the other stations run by thecompany.

“The new ROC will contribute

significantly to improving solutions,processes and equipment at the sta-tions,” said Titov Buzescu,Rompetrol Downstream generalmanager and retail and marketingvice-president of the RompetrolGroup.Rompetrol Downstream op-erates over 450 filling stations andseven fuel deposits.

Dana Ciuraru

Rompetrol pumps USD 16 million into station control center

N E W S


The European Bank for Reconstruc-tion and Development (EBRD) investedEUR 1.1 billion in Eastern Europe inthe first quarter of this year, up 64 per-cent on the same period of 2008, whenthe figure was EUR 678 million. The in-vestment was aimed at counterbalanc-ing the effects of the international finan-cial crisis in the region, and shouldreach EUR 7 billion in total by the endof the year. Last year, the bank investedEUR 5.1 billion in the region. TheEBRD has reacted to the impact of thecrisis on Eastern European countries,significantly increasing investments inthe first quarter of this year, say repre-sentatives.

The lender recently joined the Euro-pean Investment Bank (BEI) and theWorld Bank for a EUR 24.5 billion in-vestment program in the region over thenext two years.

“The EBRD is prepared and wantsto support Eastern Europe even after thecrisis ends. The investments we havemade so far this year are not enough tocarry out our promise,” said EBRDpresident Thomas Mirrow.

The bank will increase its invest-ments in Romania by an additionalEUR 500 million to EUR 1 billion overthe next two years as part of an interna-tional EUR 20 billion financial supportpackage. Approximately half of thissum will go to the financial sector, andthe rest will be invested across thebroader economy, including in the cor-porate, energy and energy efficiencyand national and municipal infrastruc-ture sectors. The international fundingpackage aims to cushion the effects ofthe sharp drop in capital inflows, whileimplementing policy measures to ad-dress the external and fiscal imbalancesand strengthen the financial sector. Cur-rent EBRD commitments in Romaniastand at EUR 1.9 billion in 110 projects.

The bank recently lent oil and gascompany Petrom EUR 300 million in acorporate senior unsecured loan.

Corina Saceanu

The total EBRD financing will reach EUR 7 billion

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EBRD invests EUR 1.1 billion in EasternEuropean region, pledges more

RBS Securities brokerage compa-ny, part of the Royal Bank of Scotland(RBS) group, has ceased its activity inRomania, after RBS started trading di-rectly as a broker on the BucharestStock Exchange (BSE) at the beginningof March. RBS Securities has asked forits authorization to be withdrawn, ac-cording to the National Securities Com-mission (CNVM). The bank has alsobeen accepted as a participant on thederivatives market managed by theBSE.

In March, RBS Securities interme-diated RON 2.6 million of transactions.The brokerage company is obliged tokeep its transaction records, as well asrecords of all its investment activitiesand services, for five years from now.

Royal Bank of Scotland’s local sub-sidiary, RBS Romania, recently re-branded from ABN Amro, is up for saleafter the bank’s mother group decided to

dispose of its non-core assets in the nextthree to five years. The move comes de-spite the local bank turning a profit, andbeing among the most solid banks inRomania, according to Romanian Cen-tral Bank governor Mugur Isarescu.

RBS Romania’s president, PeterWeiss, said that this was a strategicgroup decision and that it did not reflectthe bank’s situation or its market posi-tion and performance. After posting aEUR 28 billion loss last year, RBS hasdecided to restructure and put its sub-sidiaries into three categories.

Romania is among the countries inwhich the group is exploring new own-ership, which also includes Argentina,Slovakia, Chile and Venezuela, from atotal of 15 countries, according to anRBS presentation to its investors. In Ro-mania, the bank currently has a networkof 27 branches in 15 cities.

Corina Saceanu

RBS Securities ends activity in Romania

Romtelecom officially launched itsmobile internet offer based on CDMAtechnology, in the largest cities in Roma-nia both for residential clients and com-panies, last week. The offer from Romt-elecom Clicknet addresses customers in20 cities including Bucharest, Brasov,Cluj Napoca, Craiova, Piatra Neamt,Ploiesti, Constanta, Arad, Iasi, Sibiu,Drobeta Turnu Severin, Oradea andGalati as well as 450 sites around thecountry.

The new services will be launchedand promoted locally and regionally andthe coverage will be continually expand-ed to other urban and rural areas. Cur-rently, nearly 170 stations have been setup, but their number will increase everyday, according to company representa-tives.

“The Romtelecom strategy for CD-MA consists of expanding the networkto offer supplementary services, includ-ing to areas where the installation offixed infrastructure such as cable or fiberis not economically viable. Thus, wewill contribute to a reduction in the dig-ital gap between urban and rural areas byoffering fixed voice and wireless broad-band services,” said company represen-tatives.

Customers who wish to sign up formobile internet can choose from four of-fers which include a monthly traffic be-tween 0.5 and 12 GB.

Among telecom players, Vodafone,Orange, Zapp, and RCS RDS alreadyoffer mobile internet services.

Otilia Haraga

Yorgos Ioannidis, CEO of Romtelecom

ROM

PRES

Romtelecom launches mobileinternet offer

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BRIEFSVASS LAWYERS PARTNERSISTANBUL LAW FIRMé Law firm Vass Lawyers has signeda partnership with Istanbul-basedFora Law Office, following thecompany’s expansion strategy ofworking with foreign partners.According to representatives, Turkeyis Romania’s major economic partnerin the Balkans and Black Sea region,and the country ranks fifth for tradebetween the two countries. TheIstanbul law firm’s representativessaid that they have clients interestedin investing in Romanian industrieslike pharmaceutical, energy andhealthcare.

INDITEX OPENS FOUR BRANDSTORES IN IULIUS MALLTIMISOARAé Fashion retailer Inditex (Industriadel Diseno Textil) has opened fourstores within Timisoara-basedcommercial center Iulius Mall, forZara, Pull and Bear, Bershka andStradivarius. The stores cover 3,200sqm of retail space within thecomplex’s extended wing, which isset to open in H2, 2009. The mallwill deliver a gross built area ofnearly 178,000 sqm, including anew 95,000-sqm wing which willincrease the mall’s shopping galleryfrom 244 to 300 stores. Inditexsigned a lease agreement with IuliusGroup in October 2008, when itrented five stores in Iulius Mall Iasi.

ANA PAN OPENS ITS SIXTHFRANCHISED UNIT NEARBUCHARESTé Bakery chain Ana Pan, part of theAna Group controlled bybusinessman George Copos, hasannounced it will open its sixthfranchised unit in Romania, in Chitila.The unit will join the 19 existingbakeries and the five franchised unitsopened in Bucharest, Otopeni, Pitestiand Constanta. In 2008, Ana Panregistered a 30 percent growth inturnover due to unit expansion,reaching EUR 9.5 million in the first10 months of 2008. An averageinvestment in one unit is estimated atEUR 35,000-40,000, of which EUR10,000 represents the franchise fee.

At least one more 3G license will beassigned by the end of the year, accord-ing to Catalin Marinescu, president ofthe newly reformed National Authorityfor the Management and Regulation ofCommunications of Romania (AN-COM).

Currently, the operators on the localmarket who have a 3G license are Or-ange, Vodafone, Telemobil (Zapp) andRDS RCS. Cosmote, the third largesttelecom operator locally, has not yet ob-tained a 3G license but has often ex-pressed interest in doing so.

With a view to fulfilling the mainpriority of his mandate – increasing thenumber of broadband internet connec-tions – the ANCOM president intends tore-launch the tender for the BWA li-cences and to finalize the preparationsfor the provision of 3G services in the900-1800MHz band, as soon as possi-ble.

Moreover, ANCOM will evaluatethe possibility of establishing incentivesfor operators to extend their area of pro-vision within the existing 3G licencesand will reform, in collaboration with

them, the 3G band, in order to create theconditions to grant at least one new li-cence, along with the corresponding fi-nancial compensation.

The authority’s top priority thisyear is to expand broadband access.“The broadband penetration rate in Ro-mania is half the EU average. In thecentury of speed and information, aconnection to broadband internet at anaffordable price should not be consid-ered a luxury, but an essential. There-fore, the priority of my mandate is toincrease the penetration rate,” saidMarinescu.

Among his other priorities will be tosee that broadcasters switch to digital.“The digital switchover is both an obli-gation and an opportunity for Romania.If no clear development obligation is inplace, there is a risk that broadcasterswill fail to use the spectrum, and stickwith cable and DTH, depriving Roman-ian users of digital transmission, whichis of considerably higher quality, and ofthe chance to receive free-to-air pro-grams. Therefore, one of the authority’sobjectives is participating in the propermanagement of this transition process,”Marinescu added.

Otilia Haraga

Four telecom operators in Romania already have a 3G license, with a fifth said to be interested

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One more 3G license by the end of theyear, ANCOM announces

Over a quarter of worldwide busi-ness organizations (27 percent) have de-cided to cuts costs, downsize and slashtheir reward programs, according to thethird study conducted by global man-agement consultancy company HayGroup. This is up from 15 percent fourmonths ago. Workers in management

positions were most likely to be affected. The study, released last month,

found that 36 percent of the 2,000 sur-veyed companies in 88 countries had de-cided to freeze salaries at their currentlevels, while 39 percent are preparing formuch weaker business results than pre-viously anticipated, up from just 10 per-

cent four months ago. When Hay Groupconducted a similar study in March2008, only 12 percent of organizationsexpected their business results to be sig-nificantly worse than targeted levels.However, eight months later, that num-ber had jumped to 31 percent.

In Romania, the local subsidiary ofthe global consultancy group found that27 percent of local companies had re-duced or completely axed their trainingand development budget in 2009. At thesame time, 21 percent of all firms werereducing company travel, while 5.8 per-cent said they would cut overtime or thework schedule.

In January of this year, 30 percent offirms said they were looking again attheir bonus and benefit policies in 2009,and “would give serious consideration tothe issues and potential solutions,” saidAlina Popescu, reward information serv-ices manager at Hay Group Romania.

Magda Purice

A quarter of business organizations have moved to cost cutting, downsizing and slashing pay

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Global companies increasingly rush to freeze pay, cut benefitsand reduce working week – survey

T A X & L A W


BRIEFSOTOPENI AIRPORT TIPSTURNOVER TO SOAR 20PERCENT IN 2009 é International airport Henri Coandain Otopeni estimates a turnoverincreased of 20 percent in 2009compared with 2008, to reacharound EUR 86 million. The airportalso foresees a possible decrease of5 percent in passenger traffic, due tothe financial crisis, to an average of5 million passengers in 2009.According to airport representatives,the development of airportinfrastructure and purchasing of landwill start after the issuing of a zonalurban plan (PUZ) and feasibilitystudy.

METRO CASH & CARRY ANDUNICREDIT TIRIAC BANK ISSUECOBRANDED CREDIT CARD é Metro Cash & Carry Romania,part of Metro Cash & CarryInternational retail network, hassigned an agreement with UniCreditTiriac Bank to issue a credit cardaimed at Metro’s corporate clients.The credit line goes up to EUR30,000, with a grace period of 50days, according to the company.Maximum credit must not exceed 10percent of the company’s turnover.The system, first rolled out forcompanies in Iasi and Craiova, willexpand countrywide, according tobank representatives.

MEDIA GALAXY EXPANDSNETWORK WITH BRANCH INMILITARI SHOPPING CENTERé Media Galaxy, part of IT&C andelectric household goods retailerAltex, has opened a new unit in therecently launched Militari ShoppingCenter. The store delivers 3,000 sqm,containing 30,000 IT&C and electrichousehold products. MilitariShopping Center's commercial areaalso hosts anchors such as IT&Cretailer Domo and a Praktiker DIYunit. French retailer Auchan is payingEUR 20 million to rent a 12,500-sqmhypermarket within the complex. Thecenter’s commercial gallery comprises60 shops and 16,000 sqm of GLAfrom a total of 51,400 sqm at anestimated cost of EUR 75 million

In times of economic crisis, mon-ey becomes even more valuable than italready is. This means cutting costsand keeping controls to ensure thatrevenue is 100 percent accounted forand collected. Electricity companieshave networks through which theysupply their consumers and they incurlosses, some of which are due to tech-nical reasons (age of technology, dis-tance), and can be calculated usingmodels. Improving the infrastructuredecreases technical losses.

There are other losses which rep-resent the electricity we have pur-chased, but cannot invoice to con-sumers since we do not know where ithas gone. These are called non-techni-cal losses, and are calculated by elim-inating all known losses.

Let us look at the electricity distri-bution industry. The 2006 EURO-STAT figures show non-technicallosses at 1.05 percent; i.e. 35,379GWH. This means an overall annualimpact of EUR 6 to 8 billion. It is notthe producers, the regulators or thetransporters that are losing this money,it is the distributors. While regulatoryagencies allow for part of the technicallosses to be reflected in tariff increas-es, there is no lifeline for non-technicallosses.

These can be attributed to defec-tive meters or fraud. In the latter case,losses happen through meter fraud orillegal connections. In order to combatthem, procedures for identification,quantification, evidence collection andrecovery need to be in place, as well asdedicated organizational structures,which include data analysis and fieldintervention capabilities.

Data analysis can be used to iden-tify abnormal consumption patterns.These include:

Differences between actual andhistorical consumption;

Comparison of consumption byconsumer segments sharing similardemographics;

Seasonality comparisons;Matching anomalies to changes in

the meter or reader, meter repairs orreplacements, and tariff or schemeswaps.

Results of the data analysis can beused to identify “suspect” locations,

and guide field teams to these loca-tions so that intervention can takeplace.

Once on site, the team will discon-nect illegal connections, if any, gatherevidence, calculate and invoice the damage, remove the meters andleave. They will need to be skilled inoperational aspects and in self-de-fense, and have the right equipment tohand.

This concept can identify meterfraud; however, for detecting illegalconnections, data analysis needs to becombined with information related tothe consumers’ connections to each in-dividual point and line on the network.Thus, leakage areas can be identified.The result is a “heat map” based on in-dividual energy balances at each pointacross the network.

An important key is the integrationof the heat map information with thebilling and customer management sys-tems.

Field teams can also be guided bytip-offs received through customer callcenters, fellow employees or technicalservice. Such information should betreated with the utmost confidentialityand anonymity.

Experience has shown that thequickest way to implement the lossprevention capabilities within a com-pany involves a roadmap with foursteps, as follows:

Setting a five-year loss reductiontarget, with reasonable expectations(e.g. reducing losses by 50 percent infive years);

Performing a business case andcost benefit analysis given the targets;

Planning and performing a dressrehearsal of the loss prevention con-cept within a certain zone for a certainperiod; and performing the actual roll-out.

While serving Romanian and in-ternational clients, we have learnedmany lessons, and I would like toshare some of them with you here:

Do not start with false expecta-

tions that losses will be eliminated;Put all the necessary organization-

al and technical measures in placefirst;

Check the quality and reliability ofthe data in the billing and customersystems;

Keep all input channels to the fieldteams open;

Ensure full compliance with na-tional laws on property and trespass-ing;

Resolve the fraud matter as earlyas possible, issue invoice on the field;

Watch out for European un-bundling laws: inter-company proce-dures and SLAs; and periodicallycompare results against goals and fi-nancials.

Non-technical losses present a sig-nificant economic impact, but may al-so be a lifeline if you manage to re-cover them. Recovery can only bedone by implementing loss preventioncapabilities combined with quality da-ta and information infrastructure.

Kemal Özmen is the director re-sponsible for PricewaterhouseCoop-ers' dispute analysis & investigationspractice in Romania and SoutheastEurope. He joined PricewaterhouseC-oopers in 2008 after having spentmore than 10 years at Big Four pro-fessional services and accountancyfirms, accumulating valuable experi-ence related to fraud investigations,dispute handling, process and internalcontrols work, enterprise risk manage-ment, as well as handling IT&C is-sues, specialized in energy, utilities,telecommunications, and financialservices. Özmen obtained a Bachelorof Arts degree in Economics fromMacalester College in the USA, and iscurrently the interim vice-president ofthe Romanian Association of CertifiedFraud Examiners. Kemal has partici-pated in numerous advisory projects inSoutheast European countries, and hasappeared as guest speaker at a numberof local and international events. ■

TAX&LAWBy Kemal Özmen CFE, CIA, CISA - director,

dispute analysis & investiga-tions, PricewaterhouseCoopers

Romania and Southeast Europe

Stop losing money: combating unwanted losses in electricity


C A L E N D A R / W H O ’ S N E W S

WHO’SEVENTS, BUSINESS AND POLITICAL AGENDA NEWSFLORIN POROJAN was appointed GM

of Franke Roma-nia. He has over10 years of expe-rience in salesand managementand has worked

for various top companies on theRomanian market such asWrigley Romania, LARO Distri-bution and Electrolux Romania.He is also the president of the As-sociation of European Producersof Electronic Appliances(CECED) Romania, and a mem-ber of the management board ofRoRec, the Romanian Associa-tion for Recycling.

CATALIN MARINESCU was appointedpresident of the newly reformedNational Authority for Manage-ment and Regulation in Commu-nications (ANCOM), with a termof six years. He was previouslypresident of the General Inspec-torate for Communication andInformation Technology. Mari-nescu graduated from the Facultyof Electronics and Telecommuni-cations in Bucharest and has aMaster’s degree in Managementand Public Sector Reform fromthe University of Manchester,Great Britain.

CORINA MARTIN was appointed pres-ident of the Na-tional Associationof Tourism Agen-cies (ANAT),with a term thatruns for two

years. She is also the president ofthe Association for the Promo-tion and Development ofTourism on the Black Sea.

RAZVAN CODRUT POP, historian andcivil society ac-tivist, was ap-pointed CEO ofthe Romanian as-sociation ThinkTank. Pop is cur-

rently personal counselor to theminister of culture and the minis-ter of justice. In 2006 he was de-velopment manager of the Prop-erty Fund. He is also a foundingmember of various NGOs such

as the Association of People forArt, and the Institute for Re-search and Valuation of Transyl-vanian Cultural Heritage in a Eu-ropean context.

ANCA MARCU has recently joinedAccenture as recruitment lead –delivery center network for BPOin Europe. She previously spenttwo years at Ozone Laboratoriesas HR director for Romania andBulgaria. Before that, sheworked for Vodafone for eightyears. She started her career incustomer service, then moved tohuman resources where she pro-gressed from HR assistant to HRdirector. She graduated from theBucharest Academy of Econom-ic Studies and has also earnedHR certifications.

ADRIAN VASCU recently joined KP-MG in Romaniaas a valuationservices director.He will coordi-nate the valuationdepartment at

KPMG at a national level, aswell as being the head of the Clujoffice. He has more than 14 yearsof experience in valuation servic-es. At present, Vascu is the presi-dent of ANEVAR (National As-sociation of Romanian Valuers)and also a member of the boardof TEGOVA (European Group ofValuers' Association).

FLORIN BANATEANU has recentlyjoined KPMG inRomania as a di-rector in the EUand public sectoradvisory depart-ment. Before

joining KPMG, he worked as aproject director in the UN's glob-al development network, theUnited Nations DevelopmentProgram (UNDP). He will adviseboth private companies and stateinstitutions on accessing and ad-ministering financing, especiallyfrom the EU and International Fi-nancial Institutions. He will alsogive guidance on the formationof strategic partnerships betweenthe public and private sector.

APRIL 14

é 09.30 – Microsoft Romania organizes event on Windows 7 in Bucharest

at Pullman Hotel, Sala New York Auditorium.

é 11.00 – Cisco and UniCredit Leasing launch financing program Cisco

EasyLease at America House Center conference center.

APRIL 15

é 10.00 – 14.00- GS1 Romania Association organizes launch event for

the “Code of Good Practices in Scanning for Wholesale and Retail Sale

2009” at JW Marriott Hotel Bucharest, Galati room.

APRIL 24-26

é Executive coach Robert Dilts will be holding a workshop called “Iden-

tity Coaching”.

MAY 22-23

é eLiberatica, the largest international IT event takes, place at Politehnica

University in Bucharest.

Business Review welcomes information for Who’s News from readers.Feel free to contact us on 206 0680 (10 lines), by fax at 335 3474 or e-mail: [email protected]

Carmaker Ford, the companythat controls the majority sharepackage in Automobile Craiova, haspaid EUR 18 million for the stakebelonging to minority shareholder,the Romanian investment fund SIFOltenia. After the deal, Ford willcontrol about 95 percent of the com-pany’s share capital.

The transaction was settled atRON 17.50 lei per share, up 2.94percent on the last price established

on the market. Ford has acquired 4.27 million

shares belonging to AutomobileCraiova, representing 22.56 percentof its share capital.

Romania’s government ap-proved a memorandum by which itwill give the American carmaker thebiggest guarantee of the last 20years, EUR 320 million, to keep upinvestments in the Craiova plant,said Adriean Videanu, economyminister. According to the Roman-ian authorities, the aim is to helpprotect investments in the countryfollowing the car market’s declineand the credit crunch.

Moreover, Romania's chamberof deputies approved on March 10EUR 143 million in state aid for theFord plant in Craiova, which mustbe used by 2012 for regional devel-opment.

The carmaker purchased theplant in March last year and hascommitted to investing about EUR675 million by the end of 2012.

Dana Ciuraru

Ford increases its share package inAutomobile Craiova

The carmaker paid EUR 18 mln for the shares

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A N A L Y S I S

Recent tax change proposals – currently in the process of being updated by the government – include a forfeiting tax even for firms whichpost losses, and are intended to swell state coffers. But experts say they could instead lead to bankruptcies and rises in product prices.They could affect honest taxpayers more than the intended targets – tax evaders – who might find other ways to avoid paying, say pundits.

Forfeiting tax could bring price increasesand even more tax evasion

By Corina Saceanu

The increase in the tax burden forRomanian companies, especially SMEs,through the proposed forfeiting tax, amandatory tax applied even if the com-pany posts losses, as well as car pur-chases being made VAT non-deductible,is likely to drive up the prices of whatthe affected companies are selling. Themeasure, if applied as is, would take Ro-manian fiscal policy backwards, saysAlina Timofti, partner with NNDKPConsultanta Fiscala. Worst hit may begood faith payers, who may post losseseither due to the current economic envi-ronment or because they are making in-vestments, she explains.

The measure aims to make it harderfor firms to avoid tax through concealingprofits. But it could hurt upright firms in-stead. “Besides affecting honest taxpay-ers, the introduction of the forfeiting taxcould drive the dishonest ones to findnew means of tax evasion” says AngelaRosca, managing partner at TaxHouse.

“These kind of situations should beimproved through more efficient fiscalcontrol measures, not through hardeningtaxation,” adds Timofti.

The move could also conflict withwider rules. “The project infringes cer-tain principles in the Fiscal Code itselfand to an extent the EC treaty and someEuropean Court of Justice decisions. Itintroduces discriminatory measures be-tween various taxpayers and industries.”says Rosca. Although the governmentpoints out that France and Hungary haveintroduced a minimum mandatory tax,other countries have repealed them or re-duced social contributions, in order tohelp SMEs, “all in line with the EC rec-ommendations, in the same internationaleconomic context,” adds Rosca.

In its current form, the tax has to bepaid by start-ups, companies which havemade significant investments not depre-ciated yet, those operating in industrieswith low profit margins, and inactive

firms which may make a small incomefrom, say, interest on bank deposits andnot from operational activities, explainsRosca. Initially, a tax of 0.5 percent onall income (with few exceptions), but noless than RON 6,500 per year was to beapplied to all such firms. Afterwards thegovernment decided to apply a certaintax on revenues depending on the firm’sturnover. Special purpose vehicles, firmsset up especially for selling or buyingcertain assets, like real estate projects,could also be affected if the measures areapplied as they are. Shell companiesusually do not have operational activitiesor staff.

Timofti dismisses the reason givenby the government – fighting tax eva-sion – as a cover for the need to boost thestate budget. “Let's not forget, the IMFagreement involves certain commit-ments to increase state budget revenues”she adds.

Tax revenues will certainly rise, butif firms also go bust as a result, the in-crease might not be that important, saysTimofti. The proposed measures alsocancel the facilities introduced in 2008through the fiscal recognition of book-keeping re-evaluation.

NO MORE VAT DEDUCTION FORCOMPANY CAR ACQUISITIONS

The cancellation of VAT deductionon the acquisition of cars, included in the

first draft of the proposals, will initiallyhit car vendors, who are already facingtough times due to the financial crisis.“The new Fiscal Code is aberrant, be-cause it will favor the sale of second-hand cars on the black market, whichwill affect the sale of new cars. […] Andthe 30 percent deductibility of expensesis aberrant because it will also encouragethe purchase of second-hand cars and re-pairs in unauthorized service units,” saysBrent Valmar, GM of Porsche Romania.

The measures would impose harshrestrictions on a market which has al-ready dropped by 60 percent, and havethe opposite effect of what's expected –swelling state coffers – says Mihai Hal-magianu, director of the Audi brand inRomania. “It would encourage an in-crease in the black market, similarly tothe 90s,” he says. Audi’s planned invest-ments for this year, some EUR 25 mil-lion in expanding the dealer network and

training, could be hindered by the meas-ures and would strongly affect business-es which have never delayed their pay-ments to the state budget, he adds. Thenew measures will mainly hit companiesin the automotive industry, small andlarge retail companies alike, distributionfirms, leasing industry, companies withlow profit margins, as well as firms inthe services sector, as they might be re-quired to pay higher taxes and wouldhave to cover higher costs for their vehi-cle fleets, explains Rosca. “These firmsare already being affected by the eco-nomic crisis. This kind of pressure willsee an increase in sale prices to buyersand maybe bankruptcies,” she adds.

The forfeiting tax practically impos-es a minimum profit margin each com-pany should post so as not to be liable,explains Rosca. But state representativessays some firms have been posting loss-es for too many years and that the per-centage of those with large turnoversthat do not post a profit is too high. “If afirm has no resources to pay a RON 600tax, it means the owner has created thefirm for nothing,” says Constantin Nita,the minister for SMEs, trading and thebusiness environment. The governmentis trying to avoid companies adopting afree-rider approach, say its representa-tives. In 2007, 39 percent of the compa-nies registered in Romania posted loss-es, although their total turnovers exceed-ed RON 134 billion.

By the time Business Review wentto print the government was still dis-cussing further taxation changes. ■

Alina Timofti, partner, NNDKP Consultanta Fis-cala

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Angela Rosca, managing partner TaxHouse

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é Companies with turnovers between EUR 12,000 and EUR 50,000 will paya tax of EUR 1,000, while those with a turnover between EUR 50,000 andEUR 100,000 will pay EUR 1,500 per year, under the proposal. Thosewith turnovers below EUR 12,000 must pay EUR 500 per year.

é Companies will not be allowed to deduct the VAT on cars or car parts andcan deduct only 30 percent of the VAT for car repairs, renting or opera-tional leasing services. Amortization expenses will be limited to one carper management position.

Main fiscal change proposals

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C O V E R S T O R Y

A drastic drop in room rates, which hotels have already put into effect on the

Bucharest market, is not necessarily the way to boost occupancy, say managers

and owners. With average prices down 7 percent in January this year, according

to reports, and occupancy at lows, it will be a year of survival for local hotels.

There is still business, but they need to work harder to get it.

Bucharest sees emptier hotelsbut hopes for 2010 bounce back

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Plenty of room at the inn: Bucharest hotels have been feeling the pinch since the financial crisis started to keep business travelers away from Romania

By Corina Saceanu

These are not the best days for ho-tel managers around the world andBucharest is no exception. A quiet andempty hotel translates into decreasingrevenues at the end of the year, and theend of 2009 will find many hotels onthe local market writing smaller prof-its, if any at all, on their balance sheets.

Bucharest does not attract largenumbers of leisure travelers, it is busi-ness people who fill the hotel rooms inthe city. Last year, the beginning of acut in business travel budgets was re-flected in a drop in occupancy likenowhere else in the continent.Bucharest experienced one of Europe’slargest declines in hotel occupancyrates in 2008, down 19.6 percent to 57percent, as dwindling consumer confi-dence, lack of credit and a decliningbusiness spend threatened the hotel in-dustry worldwide, according to a re-port by Deloitte Touche Tohmatsu.

If a 57 percent occupancy seemedbad news, the data from January thisyear brings even worse numbers: occu-pancy in Bucharest hotels dropped by38 percent, to reach 34 percent of thesame period of last year, according to astudy by STR Global on 13 Bucharesthotels. True, January and Decemberare never good months for the local ho-tel market, but the decline is still con-siderable.

FLEXIBILITY ON ROOM RATES BUTNO DRASTIC CUTS, SAY HOTELIERS

Down goes occupancy, so too doprices. The average room rate in Janu-ary this year dropped by 7 percent from2008, the STR study reveals. The aver-age cost of a hotel room in Bucharestwas RON 391 in January, compared toRON 420 last year. The study covered13 above three-star hotels inBucharest.

Slashing room rates is a trickybusiness for hoteliers. They all talkabout flexibility in pricing, which is in-deed translated into lower rates, butnone wants to make the first move to-wards a drastic cut in prices, whichwould create a domino effect on themarket and decrease revenues evenmore for everybody.

“From November last year, thefour- and five-star hotels lowered theirprices significantly, sometimes almostto three-star level. This forced us tolower our rates as well,” says Jerry VanSchaik, the owner of the 16-roomRembrandt boutique hotel inBucharest. “I don’t agree with thismove. [...] I think giving more and bet-


C O V E R S T O R Y

ter value to our guests is the way to re-act to an economy in recession, not tolower prices. How can you justify toyour loyal guests in a year’s time thatthey have to pay double prices for thesame room they stayed in before? Itmay be good for our guests on the shortterm, but it is not good for a healthyhospitality industry,” Van Schaik says.

He does not have as many rooms tofill as Marten Schoenrock, who man-ages the 283-room Intercontinental ho-tel downtown Bucharest.

“A little bit more flexibility onroom rates is required these days. Allcategories need to be careful to protecttheir rates, as just dropping rates does-n't necessarily mean you'll get morecustom. Business in general has beenreduced, and reducing your rates onless traveling makes you lose on bothrates and occupancy as well,” Schoen-rock tells Business Review.

There is quite a drop to be seen inthe room rate, as well as in occupancy,he says. “The average room rate for themarket is down, as a percentage, Iwould say, by 10 to 15 percent, a resultof fewer business travelers coming toBucharest,” says Schoenrock. Punditsthink the fall is about 30 percent, butSchoenrock disagrees.

“We do not predict a decrease inrates but a higher flexibility in terms ofgroups and big events that come to-gether with a full package of services.It is already common knowledge that

é Three key markets decreased inoccupancy by more than 20 per-cent: Prague, Czech Republic,down 33 percent to a 35.6 per-cent occupancy; Budapest, Hun-gary, down 28.9 percent to 35.1percent in occupancy; and Lis-bon, Portugal, down 21.4 percentto an occupancy of 41.5 percent.

é Six key markets reported rev-enues per available room(RevPAR) decreases of less than10 percent: Berlin, Germany (-9.8 percent to EUR 51.13);Frankfurt, Germany (-9.6 percentto EUR 75.37); Vienna (-8.6percent to EUR 49.54); Munich,Germany (-8.2 percent to EUR56.74); Geneva (-6.1 percent toEUR 120.43); and Hamburg,Germany (-2.4 percent to EUR60.50).

Occupancy and revenue per room fall elsewhere too

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cutting the rates will not create new de-mand . But in order to take your shareof the market it is true that you have tobe more flexible in terms of rates inthese periods,” says Adrian Adam,sales and marketing manager with theRadisson hotel in Bucharest.

“With little good news on the hori-zon, the tourism industry will focus onsurvival this year. While slashing roomrates seems tempting, this is not a long-term solution. Hotels need to focus onservice quality, innovative incentivesand strategies that will differentiate

them from the competition,” addsGeorge Mucibabici, chairman of De-loitte in Romania.

“I read comments that the five-starhotels are hit the most and that three-star hotels are reaping the benefit be-cause people prefer cheaper hotelsthese days. In practice, the five-star ho-tels dropped their prices and the three-star hotels were forced to join this pricefall in order to stay competitive. Theimpact of this drop in prices and in oc-cupancy is huge for small hotels likethe Rembrandt,” says its owner.

LAST QUARTER THIS YEAR AND2010 TO BRING MORE HOS-PITABLE MARKET

Schoenrock of the Intercontinentallooks optimistically towards the last quarter of this year, with hope it will bring an improvement in occu-pancy and activity in the city in gener-al.

Others find it harder to estimatewhen the market will recover. “As longas hotels depend mostly on the externalmarket, for example on the multina-tional companies in Romania, it is im-


C O V E R S T O R Y

possible to say when things will setthemselves right. Other countries,where our business comes from, needto see that first, and only after that willthe home market revive,” says DinaLitzica, PR manager with JW Marriotthotel in Bucharest. “When the 9/11 ter-rorist attacks happened, it took six toeight months for Americans to regaintheir confidence and start travelingagain. This time is a little bit different,”she says.

Intercontinental's Schoenrockagrees. “I was in Chicago on 9/11.That froze everything for hotels for aperiod of time, and it took around fiveto six months for the market to re-bound. But in that case everybodyknew it would be strictly a matter oftime. Now it is uncertain, as therearen't any events in the past that can becompared to what we’re seeing rightnow,” says Schoenrock.

Instead of complaining about badresults, hotel managers know theyneed to act, and act quickly, at least tominimize losses. “Our focus was al-ways on international business travel,but this market went significantlydown in the first quarter of 2009. Wehave changed focus to projects fi-nanced with EU and government mon-ey. The budgets for these projects havealready been allocated for the wholeyear and the consultants and special-ists working in these projects still con-tinue to travel to Romania. Anothermarket which we’re aiming at thesedays is domestic business travel – thebusinesspeople from Cluj, Timisoaraand Iasi have to come to us,” saysDutchman Van Schaik.

He has gone even further, makingan appeal to patriotism: “I have con-tacted my Dutch network and called

upon their loyalty to a fellow country-man to sleep in ‘their’ Rembrandt Ho-tel. The good thing is that the econom-ic circumstances have driven us to di-versify and to be more creative,” saysVan Schaik. Smart innovation, a per-sonal approach to hospitality com-bined with the necessary cost reduc-tions will help these hotels throughthis tough period. “I hope in 2010 wewill be back on track,” he adds opti-mistically.

In the first quarter of 2009 his ho-tel had a 52 percent occupancy rate,compared to 77 percent last year. “Forthe entire year we expect a drop off of20 percent, but we are working hard toreduce this to only 10 percent,” says

Van Schaik. “There is still business, we just

have to work a little bit harder for it,”adds Schoenrock, the IntercontinentalGM.

‘SOMETIMES IT TAKES A CRISISTO MAKE ONE MORE EFFICIENT’

Nowadays hotel managers arelooking at their key indicators moreoften. “The feedback from our guestsis reviewed and quality in general getsreviewed on a regular basis, these daysmaybe a little bit more than usual,”says Schoenrock. He looks at the rev-enues and at costs, such as salaries, sothat they stay in line with the business,as well as at efficiency.

“Sometimes it takes a crisis tomake one more efficient,” he says.“We are looking at a few more cost ef-ficiency measurements now than inthe past. But we can't spend half a dayanalyzing reports when customersneed our attention,” says Schoenrock.

Forecasts no longer rely on lastyear's evolution. “We are trying tohave a realistic forecast. We don'twork with super-worst scenarios,every month we look at trends fromthe last months and apply them. Onecan't just take trends from the last fewyears and assume those still apply, es-pecially since 2007 was a very goodyear on this market. Those indicatorsdon't work anymore. What works iswhat you have right now, the recentpast,” the Intercontinental GM adds.

The food and beverage and confer-encing segment of local hotels' busi-ness, an important part of their budg-ets, hasn't necessarily seen a drop inrates. But it has seen a drop in thenumber of attendees at such events.“We have seen a fall, not from theprice point of view, but in the numberof participants, which has possiblydropped from 200 attendees at anevent to 120 now, for example,” saysSchoenrock. “People still get married,there are still events going on. Ofcourse, in the past people were stayingthree nights, now maybe they stay on-ly two and don’t spend the extra night,but the meeting still takes place,” hegoes on.

The five-star hotel he manages isundergoing a renovation processwhich should bring around 100 addi-tional rooms by the end of the year andan entire floor of conference facilitiesby mid-year.

[email protected]

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Jerry Van Schaik. owner of the Rembrandt hotel in Bucharest

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Marten Schoenrock, general manager of the Intercontinental hotel

é With the residential sales market ground to a halt, developers have found away to make use of their finished projects, and turned residential buildingsinto aparthotels. This was not necessarily a first, as it copied what develop-ers have been doing in other countries, but it was a rapid reaction to themarket. Such a move gave birth to Phoenicia Aparthotel in the Unirii areaof Bucharest, a 55-apartment development by businessman MohammadMurad, owner of the Perla Majestic group of companies. The four-staraparthotel was initially planned as a block of flats, with construction workshaving started in March 2006. Last year, however, the developer decided tomake interior modifications to change the building into an aparthotel. It isthe second project of this type, after the Phoenicia Aparthotel in Baneasaopened at the beginning of last year. The developer plans to add a thirdsuch project, also initially destined to become residential, Phoenicia Resi-dential Apartments, a 40-unit scheme in Baneasa.

é These project join several existing ones on the Bucharest market. CentreVille has been running its 300-apartment aparthotel for several years. Anew additional to the market will come with the development of the mixedMetropolis Center project, which will include a Starlight Suiten Hotelaparthotel project.

Residential turns into aparthotel

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APRIL 13 - 19, 2009 / VOLUME 14, NUMBER 13

BUSINESS REVIEW FORUM Manage your business environment !

Estates&ConstructionMARKET

JLL local office keeps same size and hopesfor similar results to 2008

The local office of real estate consul-tancy firm Jones LangLasalle expects toposts similar financial results this year tolast year, and doesn't envisage axing stafflocally as it doesn't have any exposureon the residential segment. “For this yearwe are fairly confident we can do as wellor even a little bit better than we did lastyear,” Charles Krick, managing directorof JLL in Romania, told Business Re-view. “We are trying to keep our statusquo. If we see the opportunity to bringnew people on board, we will take it. Wehave actually hired someone recently,but it has to be opportunistic led. We

have been able to maintain the status quobecause on the residential side wehaven't been involved,” says Krick.

But could the difficulties of the localmarket persuade some foreign names topull out? Some smaller internationalconsultants are likely to give up on theirRomanian activities, Krick believes.“For the larger consultants, it's also pos-sible, but there really needs to be someadditional tough times for that to hap-pen. There are some groups out therewith difficulties in funding themselves.If the crisis deepens, these groups withfunding issues might need to potentially

pull out from some markets in order tosave the firm, but it will not be due tolosing so much money here, rather an-other issue in their home markets,”Krick explains.

The firm has seen demand on thevaluation and office and retail leasingside, as well as on project management,at a similar level to last year. “We’re see-ing a couple of leasing deals a month onaverage, ten to 20 office and retail leas-ing deals – usually these are weighted to-wards the end of the year, as the secondhalf of the year is when we do most ofour deals,” says Krick. Leasing dealstypically range from 500 to 2000 sqmper deal, he adds, saying the firm sawleased areas dropping in the first quarterof the year.

On the valuation segment, with de-mand coming from both local and for-eign developers and investment funds,JLL has seen local portfolios dropping invalue by 10 to 25 percent on average. “Itcould be higher or lower, depending oneach case,” says Krick. “The drop inportfolio values is probably comparableacross the CEE region, but it depends onthe perceived level of risk of each coun-try. Those countries perceived as beingmore risky have probably seen propertyvalue drop by a larger percentage.”

Romania is perceived as riskier thanWestern markets and even other CEEcountries, because the real estate markethere is not yet as developed as in the restof the region. “Once the economy startsto grow in Romania we should see somepositive effects of that on real estate, andwe want to make sure we are here whenthe market starts to pick up,” Krick con-cludes.

Corina Saceanu

Charles Krick, managing director of Jones LangLaSalle in Romania

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E S T A T E S & C O N S T R U C T I O N M A R K E T

In a transaction mediated by BNPParibas Real Estate Romania, AutoitaliaGroup has leased 500 sqm of retail spacein Alexander Center, for a new autoshowroom. The project, which will hostthe new Infiniti showroom, was devel-oped by Loi, for a total investment ofEUR 15 million The building providesapproximately 6,200 sqm of rentablearea, 3,350 sqm of offices and 2,800sqm of retail space.

The office block has four levels witha total rentable area of 6,600 sqm and 74parking spaces, according to the draft.Loi is owned by Greek businessmanSpyros Loizos, who controls a 60 per-cent stake, and Greek company Loimac,which carries out industrial car importsin Romania.

According to a report by BNPParibas last month, the office market inBucharest is experiencing the negativeeffects of the economic downturn mani-fested in declining rents and leasing ac-tivity. Although the segment performedremarkably well in the first semester of2008, market fundamentals have beensoftening at a moderate pace especiallysince Q4. The current real estate marketsituation creates demand from compa-nies that are currently locked into rentalcontracts signed a while ago, which nowexceed the current rental market value.These tenants are trying either to rene-gotiate their ongoing lease or obtain abetter quality for the price they pay inother buildings, the report says.

Magda Purice

BNP Paribas Real Estate Romania manages 500 sqm leasingcontract for Autoitalia Group

Construction materials producerSaint-Gobain Romania, which has ninecompanies on the local market, posted aturnover of EUR 214 million in 2008, aboost of 17 percent compared with theprevious year’s result. In 2007, the com-pany registered a turnover of EUR 218million.

The company said it had registeredan export value of EUR 56.2 million in2008, with the major targeted markets inthe Balkans, Black Sea region, MiddleEast and Western European countries.

Last year, the company investedsome EUR 26 million on the Romanian

market, with its main focus on the newequipment installed at the Calarasi-based glass factory operated by Saint-Gobain Glass Romania.

“In 2009, we will target out attentionon consolidating our market positionand our efficiency on each segment. Ifthe marker evolves, we will restart ourinvestment strategy,” said Olivier Lluan-si, general manager of Saint-Gobain inSouth-Eastern Europe. According tohim, Saint-Gobain Romania pro-nounced the last quarter of 2008 asweak, below its estimations.

Magda Purice

Saint-Gobain Romania ups turnover to EUR214 million in 2008

The cost of homes in Romania fellby an average of EUR 200 per sqm in allRomania’s big cities in Q1, withBucharest seeing the highest correction,of EUR 300 per sqm. Supply and de-mand figures indicated that the sale priceof old apartments have fallen continu-ously since the beginning of 2009, butdespite the drop buyers are still not be-ing lured back into the market.

In Bucharest, two-room flats builtbefore 1990 lost around EUR 343 fromthe January-posted sales price of EUR1,880 per sqm to reach EUR 1,537 persqm. For instance, a 54-sqm two-roomapartment in the capital now goes forEUR 50,000 (for locations such as Dru-mul Taberei, Giurgiului, Giulesti, Gorju-lui) up to EUR 83,000 sqm. However,buyers still consider the prices exces-sive, according to real estate agencies.

Prices are also tumbling in cities asBrasov and Cluj-Napoca, with apart-ments losing around EUR 200 per sqmfrom their value in January. A two-roomapartment in Cluj-Napoca now costsabout EUR 67,000, with some areas,such as Zorilor, demanding even lowerprices, of EUR 57,000. In Brasov thefalls and prices are similar. Timisoara isnow seeing sales prices down to a cur-rent EUR 1,290 per sqm, with apart-ments in some areas up for sale for EUR60,000 or even EUR 50,000. Homes inIasi cost even less, with flats on the mar-ket for EUR 1,070 per sqm, down fromEUR 1,298 in January. An apartmenthere can go for as little as EUR 35,000,according to residential portalwww.imobiliare.ro. Lack of demandmeans that prices will continue to slump.

Magda Purice

Prices of old apartments lose EUR 200 per sqmcountrywide in Q1 freefall, Bucharest worst hit

The volume of intermediated trans-actions in H2 of last year was down 20percent on the same period of 2007 forPerfect Casa, which reflected the down-wards trend all over the local real estatemarket. “By the end of the year, manyof us may have re-thought our business,alloted more attention to the training ofreal estate agents, and put more effortinto transactions, because those timeswhen the telephone was ringing andcustomers were queuing are gone for avery long time,” says Jeni Dragomir,president of Perfect Casa.

At the end of last year and in thefirst months of this year, although theresidential market got stuck, severaldeals were sealed on the luxury residen-tial segment. “There were few transac-tions, but they were valuable, becauseprices on this segment will never go be-low a certain threshold and becausebuyers have liquidities,” says Dragomir.

Sale prices on the luxury residentialsegment have dropped from an averageof EUR 3,500 per sqm in March lastyear to some EUR 2,500 nowadays, al-though there have been few transac-tions. The current prices are not likely to

decrease, she thinks, and by year-end,listing prices will be closer to saleprices.

Office leasing was also a dynamicsegment, because many companies haverelocated or started to renegotiate theirrents. “The land segment was indeed themost affected because developers don'tbuy land anymore. Land prices have notonly dropped, but pricing on this seg-ment has become chaotic, with a big dif-ference in listing prices between adjoin-ing land plots,” says Dragomir.

“Obviously, like any other companyin the real estate market, we will have adifficult year; those who say otherwiseare not realistic. It is very hard to esti-mate our turnover for this year: there aremany variable we don't know, nobodyknows them, there are many evolutionswhich depend on the international frameset, on financial measures the local gov-ernment might take,” she says.

“But I don't think it will get muchworse, which is a good sign: whenthere's no place to fall, you stay there fora while, and then the only way is up,”says Dragomir.

Corina Saceanu

Perfect Casa: days of customers queuing arelong gone and won’t be back any time soon


A N A L Y S I S

The bigwigs of the Economy Ministry see another future for the

national energy company (CNE). Minister Adriean Videanu has

announced he is abandoning the formation of a national energy

company approved in October last year, and now plans to form

two or even four national energy companies. The big change:

Nuclearelectrica, Romgaz and Electrica will not be include in the

ministry’s new plans. According to Videanu, the new firms

should become operational in October, when the presidential

election takes place and things are about to change again.

One CNE or four CNEs?That is the question...

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Bridge over troubled waters: the Economy Ministry has gone back to the drawing board over the CNE

By Dana Ciuraru

“We have to restructure the ener-gy production sector in order tohave two or even four profitable na-tional energy companies, which willput Romania’s energy potential togood use. The restructuring processwill create the performance premis-es for everything related to energysector in Romania,” said AdrieanVideanu, the economy minister, re-cently.

The Romanian official’s state-ment comes as a surprise to energymarket players, as all speculationsurrounding the national energycompany seemed to be settled at theend of last year.

On October 8 of 2008, the Ro-manian government inked an emer-gency ordinance approving the for-mation of a national energy compa-ny. According to the document, thenational power entity, with a totalcapacity of 10,000 MW, wouldcomprise the state-owned hy-dropower producer Hidroelectrica,electricity distributor Electrica andthe power complexes in Rovinariand Turceni.

Romanian officials estimated atthat time that the value of the na-tional energy company would be be-tween EUR 20 and 24 billion, andwould reach an operating profit ofEUR 800 million by 2012. More-over, the authorities even had plansto list the company on the stock ex-change in the next two or threeyears, with about 25 percent of theshares.

The economy minister has nowmade a 180 degree about turn in thestrategy for this project which, ac-cording to the statement made fivemonths ago by government offi-cials, was expected to become oper-ational in March this year. In brief,new government, new ideas, newexperiments, no concrete results.

Videanu has now set anotherdeadline. “This strategy must bediscussed with each company fromthe energy production structure. Atthe end of this year, I estimate thatthese companies will be fully opera-tional,” said the minister.

WHO IS LEFT ON THE SIDE-LINES?

Although, as the architect of thenew plan, he might be expected tohave details about the several na-tional energy companies, the minis-ter was unable to give any clarifica-

tion as to which state-owned com-panies would be included in the re-structuring process.

He stated only that he wouldconsider the development of thesebusinesses by public-private part-nerships and joint ventures.

However, Videanu’s reticence togive details has not presented spec-ulation on the market about the con-stitution of the two national energycompanies. One, rumor has it,would be formed of Portile de Fier,Electrocentrale Bucharest, Mintiathermo power plant, Paroseni, De-va, Autonomous Company for Nu-clear Activities (RAAN) and Com-pania Nationala a Huilei. The otherwould consist of Lotru, Valcea and other hydro power plants, thethree energy complexes Turceni,Rovinari and Craiova and Soci-etatea Nationala a Lignitului Oltenia(SNLO).

Things might look good on pa-per, but it is worth remembering thatsome of these companies have a lotof work to do. For instance, Com-plexul Energetic (CE) Turceni willbe forced to close units three and sixif the company does not completeits EUR 120 million investment in environment measures by Janu-ary 1, 2010.

One thing is for sure: state-owned companies Nuclearelectrica,Romgaz and Electrica will not beincluded in the new plans of theEconomy Ministry.

“The decision to exclude Elec-trica was taken in order not to dis-criminate against the most impor-tant foreign energy groups with op-erations on the local market, whichhave acquired only energy distribu-tion companies and have no produc-tion capacities which are controlledby the state,” market specialists toldBusiness Review.

This new project will probablybe analyzed next month and, if allgoes smoothly, the companies areexpected to be operational in Sep-tember-October. Market specialistsare skeptical, as around the time ofthe new deadline given by the Econ-omy Ministry, Romania will have toface another challenge: presidentialelections. It is unknown which par-ties will form the majority in Parlia-ment at that time. What is also un-sure is whether the Romanian au-thorities will manage to make goodon their plans, or whether this newidea will join the others in the wastepaper bin.

[email protected]


F I L M R E V I E W

In the UK, seven pounds(RON 32) is about what you’dpay for the average cinema tick-et. Here, unless you are rich orfoolish enough to frequentBucharest’s costliest multiplex-es, the price is thankfully a lotless. This means that when youfind yourself watching a trulydire movie, at least you’ve onlywasted your time, not your mon-ey. At points, Seven Pounds feelslike a truly dire movie. At otherpoints, it feels like brave andoriginal filmmaking. What otherpicture starts with the main char-acter’s suicide?

Proceedings get underwaywith Will Smith (erstwhile FreshPrince of Bel Air and rapper,now serious artist) in a motelroom, on the phone to the emer-gency services, reporting hisown suicide.

So far, so intriguing. Is it acry for help? Does he hope to be

saved? What has driven him tosuch a desperate act? The filmthen flashes back to fill us in onprior events.

We see Will going about hisduties as a tax inspector. At thispoint, you might be thinking thatthis isn’t going to make for avery exciting film, and maybe heshould get back to saving theworld from aliens while deliver-ing witty one-liners.

But wait. This is no ordinarytax inspector. Instead of poringover balance sheets with a calcu-lator, Will becomes part stalker,part agony uncle to his tax de-faulters, dividing them neatly in-to deserving and non-deservingof tax breaks. If they are excep-tionally pretty young women,like Rosario Dawson, he alsodates them.

It doesn’t seem a particularlyprofessional way to run the In-ternal Revenue Service. But

there is more than it seems toWill’s cavalier execution of hisobligations.

All of the debtors happen tobe seriously ill. And in betweenvisits, Will spends a lot of timelooking out to sea in a troubledmanner, shouting out sevennames in anguish and sufferingflashbacks of a car crash and himfrolicking on the beach with anattractive woman. He alsophones up a blind call centerworker (Woody Harrelson) andabuses him, while giving awaymost of his possessions. I did sayit was original.

Slowly (the film lasts overtwo hours) the pieces of the jig-saw fall into place, and Will’smission becomes apparent. Lit-erary-minded viewers will at thispoint recognise the significanceof the title, which is a Shake-spearian reference to The Mer-chant of Venice and Shylock’s“pound of flesh”. You might notreadily associate Shakespeareand Will Smith – although theydo of course have the same firstname and same initials. This isanother incongruity of a thor-oughly incongruous film.

Seven Pounds is part drama,part romance. The best bit is thedrama. The story really is quiteunusual and at times shocking.With a puzzle at the heart of thenarrative, it doesn’t spoon-feedits viewers as much as you might expect. That said, this isHollywood – the puzzle is notexactly Rubik’s Cube-like in its fiendishness (car crash, fiancewho is no longer around, Willlooking tortured with guilt...

Hmm, what could have happenedhere?). Melodrama, cringe-wor-thiness and overblown sentimentabound, particularly in the ro-mantic subplot, and the film isoften guilty of taking itself veryseriously indeed.

But since the lowbrow start tohis career, Will Smith has be-come a competent and convinc-ing actor, and he acquits himselfwell enough in the part of theenigmatic tax inspector. Harrel-son is a believable blind man,and Dawson makes the best outof what is, despite the serioussubtext of her illness, a stocklove interest role. Despite thefilm’s many flaws, the end isquite touching, though I’m stillglad I didn’t pay seven pounds.

Debbie Stowe

Director: Gabriele MuccinoStarring: Will Smith, RosarioDawson, Woody HarrelsonOn at: : Cityplex, HollywoodMultiplex, Starplex, The Light

Taking a pounding: Rosario Dawson plays the love interest who is literally heart-broken

Where there’s a Will: Smith seeks redemption

FILMREVIEW: Seven Pounds


E V E N T S

Two well-known American rappers, Fat Joe andBusta Rhymes, will perform in Romania, accord-ing to local news wire Mediafax. BUSTARHYMES will perform at the seaside resort ofMamaia, while Fat Joe will play in a Bucharestclub on April 24. Currently, Fat Joe, who hasbeen a name on the rap stage since the 90s, isworking on a new album. He has collaboratedwith numerous artists such as Ja Rule, Ashanti,Nelly, Jadakiss, R. Kelly and Eminem. BustaRhymes, who is well known for his unique hu-morous style, already has a new album comingout this year called "Back on My B.S."

A total of 107 works of classical, modern andcontemporary fine art from 80 of the mostrenowned Romanian artists will be auctioned byArtmark on April 16 at the Radisson SAS Hotel.Works by painters Nicolae Tonitza, Nicolae Grig-orescu, Corneliu Baba, Stefan Luchian and IonTuculescu will be up for grabs. Prices will startfrom EUR 50,000 for some of the paintings. Be-fore they go under the hammer, the works arebeing displayed in the foyer of the Atlas room ofthe Radisson. The highest price that a work hascommanded at Artmark is EUR 120,000, for “TheGirl in Pink” by Nicolae Tonitza.

LAU

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TIU

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The first edition of the Spring Retro – Parade onthe Wine Road, which showcases old collector’scars, took place at the end of last week. Everyyear, the members of the Retromobil Romaniaclub present their classic cars. While the eventwas in previous years a static one, this year theorganizers decided to do things differently. So,46 vintage cars belonging to members of theRetromobil club, whose honorary president isKing Mihai of Romania, were showcased in theAviation Museum. Twenty-eight of them thentook to the road to a location 77 km fromBucharest. The route they took was called TheWine Road, a tourism project with great poten-tial for the wine tourism industry which has sofar been neglected by the authorities.

Fourteen re-mastered albums released byBritish band the ROLLING STONES between1971 and 2005 will go on sale in Romania fromMay, according to the Universal Music label. Thealbums that will be released, in a remasteredformat, are "Sticky Fingers" (1971), "Goats HeadSoup" (1973), "It's Only Rock 'n' Roll" (1974) and“Black And Blue" (1976). June will see thelaunch of classics such as "Some Girls" (1978),"Emotional Rescue" (1980), "Tattoo You" (1981)and "Undercover" (1983). Finally, the remainingalbums "Steel Wheels" (1989), "VoodooLounge" (1994), "Bridges To Babylon" (1997)and "A Bigger Bang" (2005) will be out in July.Rolling Stones played in Romania in 2007 infront of approximately 45,000 fans.

Bike rental center Cicloteque has reopened with the coming of spring for those who want to hop ona bike and dodge the heavy Bucharest traffic. Cicloteque places at the public’s disposal 100 bicyclesand the necessary accessories such as protective helmet, gloves and knee pads. The bikes can berented through subscription, for those who wish to keep them for a longer period, or just by payinga fee for several hours’ use. Since it was launched, Cicloteque has managed to attract around 2,000customers, out of whom 200 are subscribers and the rest occasional users. Cicloteque was firstopened last year by the MaiMultVerde NGO and UniCredit Tiriac Bank.

A picture exhibition that is part of an interna-tional program for the promotion of humanrights called “Speak Truth to Power” will openin Carrefour in Baneasa Shopping City Bucharestin the presence of its initiator, KERRY KENNEDY(in pic). The exhibition showcases 50 portraits ofimportant defenders of human rights all overthe world interviewed by Kennedy. Their pic-tures were taken by Pulitzer prize-winning pho-tographer Eddie Adams. The subjects are bothrenowned names in human rights such as NobelPrize winners the Dalai Lama, ArchbishopDesmond Tutu and Elie Wiesel, as well as lesser-known activists, such as environmentalist Wan-gari Maathai of Kenya and abolitionist leader Ju-liana Dogbazi of Ghana. The exhibition will rununtil April 23. The exhibition has traveled fromthe US to Greece, London, Madrid, Barcelona,Sydney, Helsinki, Rome, Seoul, Florence, Man-tua, Johannesburg, Cape Town and Doha.


E V E N T S

Romanian designer CATALIN BOTEZATU (pictured above with Chang S. Oh, managing director ofMega Designer Outlets) will open the first factory outlet store within MDS. The store will have a sur-face of 200 sqm and include all the designer’s clothing lines – couture, prêt-a-porter and lingerie.Botezatu pronounced the store “a good solution for those who, even in difficult economic conditions,remain faithful to quality products and luxury brands” which “addresses those who want exclusiveproducts at lower prices than in the center of town.” Botezatu, who works with German fashion brandQuelle, presented on April 7 a collection of bathing suits, conceived especially under the MDS brand. Protests have raged in the Moldovan capital Chisinau, after the Communist Party won elections in

the country. Expatriate Moldovans living in Bucharest organized meetings in the Romanian capital

too, to show their support for their compatriots. The protests escalated to diplomatic level as

Moldovan state representatives blamed Romania for the unrest. The Moldovan authorities ordered

the Romanian ambassador to Chisinau to be expelled and said Moldova was considering re-intro-

ducing visas for Romanians. Romanian president Traian Basescu said he would address Parliament

on the foreign policy issue this week.

One of the most notable annualevents in Romania’s film calendar, theEuropean Film Festival, will takeplace between May 8 and 31 in fourcities. During this period, 37 moviesfrom 24 countries will be screened inBucharest, Brasov, Timisoara andIasi, according to a newswire.

In Bucharest the 37 productions

can be seen between May 8 and 17.This year, the festival’s honorary am-bassador will be Romanian directorMarian Crisan. Previous editions sawthis position being held by other im-portant Romanian directors such asCristi Puiu, Corneliu Porumboiu andCristian Mungiu.

Otilia Haraga

European Film Festival takes place in four Romanian cities

business review issue 13 2009

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