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Dan Copocean, Kimball Electronics
"I believe that the Romanian economy continues its development"»
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French investments in Romania: A Tint of Savoire-Faire

France and Romania became business partners in the early 90s and since then the bonds have been built on trust and mutual commitment. Currently, France is the fifth-largest foreign investor and the fourth-largest trading partner of Romania, intending to keep enhancing its footprint

2016-08-20 23:42:20 - From the Print Edition

14 Photos
Alexandra Cioboata talks to representatives of French Embassy, CCIFER and large French companies to emphasize their ways of tapping business this year.

Romania and France have started to bury the hatchet regarding past political disagreements and diplomatic bonds seem to flourish again. Romania's Prime Minister Dacian Ciolos visited France on 9 and 10 June 2016, meeting with the President of the French Republic, Francois Hollande, and attending the France-Romania football game for the opening of the 2016 European Football Championship, together with Hollande and his counterpart, Prime Minister Manuel Valls. During this visit, the Roadmap, which implements the bilateral strategic partnership between France and Romania, was updated and signed. The document reflects the interest of both parties in strengthening dialogue, and moving on to a new stage of development in the bilateral relationship. It gives a political signal in support of a series of actions on which both countries will seek to enhance their cooperation.

In terms of economic relationship, however, France and Romania have always witnessed a positive development, as French investors found business opportunities in Romania since the early ′90s and have built a long-term relationship with the country. Many SMEs back then started to establish a presence by following the development of a large company. The largest investors are companies which are now well-known by the public, such as Dacia-Renault, Orange, BRD and Groupama. These companies are highly integrated into the Romanian economy; for example, Dacia-Renault now accounts for eight per cent of Romania's exports, according to the data of the French Embassy in Romania issued to The Diplomat – Bucharest.

France is the fourth-largest trading partner of Romania (with 6.8 per cent market share), the bilateral trade between Romania and France increasing by two per cent in 2015, in comparison to 2014, to 6.8 billion Euro. In addition, France is the fifth-largest foreign investor of the country, the direct investment value on local market amounting to around 4.1 billion Euro (6.8 per cent of total FDI) at the end of 2014, down from 4.5 billion Euro (7.6 per cent of total FDI) at the end of 2013, according to the National Bank of Romania (BNR) report published last year.

According to the Banque de France statistics, quoted by the French Embassy in Romania, the total of French direct investment in Romania stood a little less, at 3.8 billion Euro in 2014. Since 2011, data shows that annual inflows of FDI from France have been relatively stable, with a small reduction, but no specific downward pattern. The fluctuations, which are usual for international investment flows, are often related to the amortization of invested capital, or to intra-group loans (e.g. to cover an expansion in output capacity), says Pierre Moussy, the head of the economic mission at the French Embassy in Romania.

"France remains the fifth-largest foreign investor in Romania, with probably a higher ranking if we take into account indirect flows," Moussy tells The Diplomat – Bucharest. "French companies hold very important positions in several sectors, such as the automotive industry, telecommunications, banking, energy, retail and agriculture. It is important to assess the role and impact of foreign investment, not only in financial terms, but also in terms of its effect on employment. By doing so, the contribution to the Romanian economy of French investors can be better understood. For instance, today, more than 450 companies are members of the French Chamber of Commerce and Industry in Romania (CCIFER) and directly generate more than 135,000 jobs."

Bilateral trade remained dynamic in 2015, with a growth rate of two years compared to 2014, up to 6.8 billion Euro. This growth was mainly driven by Romanian exports to France, which grew 6.2 per cent to reach 3.4 billion Euro in 2015. In the other direction, French exports to Romania decreased slightly (-1.5 per cent) to 3.4 billion Euro. After a sharp increase in Romanian exports to France during the 2009 crisis, bilateral trade has been progressively rebalanced since 2010 through the resumption of French exports, which has resulted in a reduction of the trade deficit accumulated by France. However, the French trade surplus is now on a decreasing trend. In 2015, France registered a very small trade surplus with Romania, namely 12 million Euro, down from 292 million Euro in 2014.

"Bilateral trade between France and Romania is now largely determined by the importance of French production investments in Romania, particularly in the automotive industry," says Moussy. "A significant proportion of French exports today is represented by the supply chain of French groups in the context of intra-firm trade. This is particularly the case in the automotive industry, but also in engineering, plastics, textiles, services and specialised retail."

French investors, satisfied with Romania's economic development



The current business environment in Romania is favourable to both newcomers and companies already present here, as the political environment is relatively stable and the economic growth is among the highest in Europe, say experts. The Romanian economy is moving forward due to a strong domestic demand. The country is outperforming many of its peers in Central and Eastern Europe with its robust growth. According to the latest macroeconomic forecast of the European Commission, growth is expected to reach 4.2 percent in 2016. In the first quarter, when the GDP rose by 4.3 per cent, growth was driven mainly by private consumption, supported by increases in the minimum wage and public wages, a reduction of VAT on food items, low inflation, as well as a recovery of credit. A catch-up in absorption of European Union (EU) funds also contributed to an increase in investment in 2015. According to Pierre Moussy, head of the economic mission at the French Embassy in Romania, French investors are content with Romania's latest developments.

"In general, French investors are satisfied with the latest economic developments and short-term economic forecasts," he says. "Strong domestic demand boosts virtually all sectors. Of course, the sectors related to consumer goods are the first to benefit from this strong demand, but they are not alone. Many French investors are companies that produce in Romania and have exported to other countries of the European Union. These companies also show a high level of activity."

Francois Coste, the general manager of Groupama Asigurari and the newly appointed president of the French Chamber of Commerce and Industry in Romania (CCIFER), echoes the same view as Moussy. According to him, year-on-year, including 2015, there has been a real dynamic from the new comers and an optimistic perspective from the investors that are already here.

"Our quarterly barometer shows an optimistic trend in the beginning of the year and throughout all the consultations we had with the companies we can easily confirm this perception," Coste tells The Diplomat – Bucharest. "Our community is in a continuous evolution and we are confident that the newcomers are here to stay. For example, last year Airbus opened a new factory in Brasov, Lactalis bought the Romanian company Albalact, Leroy Merlin expanded with the acquisition of BauMax and Carrefour purchased Billa and its 86 supermarkets. (…) Romania is attractive both for its internal market, with the second biggest population after Poland in Eastern Europe, and also for nearshoring opportunities given the competitive business environment. The Romanian business environment could be even more competitive and CCIFER contributed in 2015 with its ideas compiled in The White Book of Competitiveness discussed with Authorities."

In 2016, CCIFER celebrates its 20th year of existence. Over these 20 years, CCIFER has accompanied more than 1,000 companies interested in the Romanian market: searching for clients or providers, accompanying measures and helping when settling their offices in Romania. Since early January, CCIFER has organized 12 prospecting missions for French companies interested in developing business opportunities in Romania which, according to Coste, shows a growing interest for the potential of Romania.

"Aerospace industry will see strong growth in the coming years"



At the end of 2014, around 8,000 companies with French capital were registered in Romania, of which around 4,000 are estimated to be active. In 2015, French companies continued to invest in Romania and consolidate their position in various sectors such as general retail and specialised distribution (such as Carrefour, Auchan, Cora, Leroy Merlin and Decathlon), the food industry (such as Lactalis and Danone), the automotive industry (e.g. Faurecia, NTN-SNR and Valeo), IT services (e.g. Atos and Orange), financial segment (BRD/Societe Generale, Groupama and BNP Paribas) and last, but not least, aeronautics (such Airbus Helicopters and Novae Aerospace), the latter witnessing a strong interest from investors lately.

"An important recent trend - and a very significant one for the future of the Romanian economy - is the development of the aerospace industry, notably in Transylvania," says Pierre Moussy, head of the economic mission of the French Embassy in Romania. "Many investors, from France and other European countries, decided in 2015 to step up their production as well as to increase the technology content of their production in Romania. Airbus launched the construction of a plant in Ghimbav for the assembly of a new helicopter, the H215, in particular for export purposes. This project will greatly contribute to the development in Romania of an industrial ecosystem focused on aeronautics, with many partnerships involving Romanian companies. The Romanian aerospace industry will see strong growth in the coming years thanks to these investments," he adds.

Other sectors with potential for French investors, besides the ones mentioned above, include energy, electrical engineering, electronics and chemicals, the rubber industry, textile/shoes/leatherwork, wood treatment and pharmacy. However, the segment with one of the highest contributions to the GDP remains automotive. "When speaking about the most flourishing business sectors, we can mention the automotive industry which contributes the most to the economic growth," says Francois Coste, CCIFER president. "In 2014, the automotive industry accounted for almost 11 per cent of the GDP, with a global value of 16 billion Euro."

The development plans of French investors on the local market vary widely from one company to another. For some, the objective is to establish or strengthen their presence on the Romanian market, but for many the motivation is to increase their production capacity for exports, whether in the area of goods or services. However, the head of the economic mission notes that for all companies, in all sectors, a crucial factor for their development is training. According to him, a project is underway, in close cooperation with the French Chamber of Commerce and Industry in Romania, to draw up proposals on this topic and present them to the Romanian authorities.

"Concrete projects have also been implemented by some French companies," says Moussy. "For instance, Airbus Helicopters is teaming up with the Romanian Ministry of Education, Brasov School Inspectorate and the Transylvania Technical College to create a new aeronautical vocational school qualification to be implemented as part of the Romanian national education system at vocational school level. Another innovative initiative in the high tech field is the Academy+plus school, established by the company Pitech+plus in Cluj. The school is based on the model of Ecole 42, founded by Xavier Niel in France. This school is primarily professional. It is free and is aimed at students without a formal qualification, the only criteria being interest in IT and motivation," he concludes.

Next, The Diplomat – Bucharest talks to several key French players to stress their development in the first half of 2016, to uncover the main advantages and disadvantages of the local market and to establish their most important business objectives for the following period.

Arval registers this year the best Q1 ever, surpassing 8,000 units under management



Last year, French-based Arval Romania, one of the largest companies specialized in operational leasing and corporate vehicle management, registered 12 per cent growth in terms of turnover, posting 37 million Euro, and 15 per cent increase in terms of fleet under management, reaching more than 7,600 vehicles. This year, however, the company continued the business rise and recorded the best Q1 results in Arval's history, surpassing 8,000 units under management. Thus, Arval became the second largest player in Romania and plans to reach 8,400 units by the end of 2016.

"Unfortunately, we don't have the results for the first half of the year, but we managed to centralize the first quarter's data," Dan Boiangiu, the general manager of Arval Romania, tells The Diplomat – Bucharest. "We have had the best Q1 ever, as we grew by 20 per cent in terms of number of registrations and we increased our fleet by 14 per cent, above the average market growth of 13 per cent. Thus, we now rank second place given the fact that in Q1 last year we were number four. This allowed us to reposition ourselves as one of the leading players on the local market."

One of the main factors that contributed to the success of the company in the past few months is represented by the slight change in terms of development strategy, says Boiangiu. Although the client was always on top of the priority list, Arval shifted its attention more on the end-user, namely the driver. "The contentment of the end-users is very important for us," he says. "If the drivers are satisfied, our clients will be satisfied. We tried to enhance our relationship with the end-users to find out what their main concerns are, to improve the services or to do things differently. Due to technology, we can communicate with 8,000 people at the same time and we can be closer to both clients and drivers in order to receive feedback easier."

If last year 75 per cent of Arval's contracts came from existing customers, who have chosen to renew their operational cycles, in Q1 the GM noticed a high interest in terms of new clients. The main clients of Arval come from automotive, retail, agriculture and pharma, being mainly large international corporations. Recently, however, the company also set its eyes on SMEs, as, according to Boiangiu, there is a lot of potential. "The market is increasingly professionalized as the product has a very good reputation among customers," he says. "There are increasingly more SMEs which want to test this kind of product. I expected this trend to come as the market of large companies might get saturated at some point and we will have to find new customers. However, fortunately, after the crisis, businessmen have stopped looking at cars as assets and started to see them as costs," he concludes.
In terms of other objectives, Arval plans to launch a car-sharing project, but further details could not be disclosed. The company has been present on the local market since 2006 and counts 55 employees. As a subsidiary of French bank BNP Paribas, Arval Group has almost 950,000 vehicles under management with a direct presence in 28 countries. Arval is part of the longest standing strategic partnerships in the fleet management industry, Element-Arval Global Alliance, the worldwide leader managing more than three million vehicles in almost 50 countries.

ALD Automotive foresees a strong outcome for this year



French-based ALD Automotive Romania, another important operational leasing and fleet management company on the local market, increased its fleet size by six per cent in 2015 compared to the previous year, reaching 8,876 vehicles, while the company's client portfolio registered an increase of 26 per cent in the same period of time, resulting in a total number of 336 active customers. 80 per cent of these agreements are full-service operational leasing contracts, while the rest are for managing the fleets. All these actions resulted in a 30.5 million Euro turnover, based on international financial reporting standards, and in an enlarged portfolio of companies from various industries like pharmacy industry, financial services, FMCG and telecom companies. For full year 2016, the company hopes to achieve around 32 million Euro turnover.

"We will continue our efforts in developing our portfolio, both the fleet and the number of customers," Shane Dowling, the general manager of ALD Automotive Romania, tells The Diplomat – Bucharest. "And we will achieve this goal by diversification of our offers, since we have started addressing a new segment of customers, SMEs. We will further concentrate our capabilities to develop technologies that increase the mobility of current and potential customers, and solutions for electric and hybrid vehicles fleets in order to protect the environment. Already in H1 of 2016 we have seen a five per cent increase on our full service operational leasing portfolio which keeps us in line to achieve an annualised growth in full service leasing of ten per cent this year."

The main objective of ALD Automotive this year is to increase its fleet and its portfolio development through the renewal of contracts with existing clients and by signing deals with new customers. Another segment of interest to the company is related to the digitalization of its operational leasing services, and in doing so ALD Automotive is preparing the launch of a new mobile application and a web platform, so that customers can monitor the fleets and manage it more easily and in real time. The mobility services are a focal direction in the Group's strategy, says Dowling, since it wishes to anticipate customer needs, by incorporating the latest technologies into its business model.

"The objectives for the coming years are connected to the business strategy of the company by addressing a new niche, SMEs," says the general manager. "They will benefit our special attention and we will develop new dedicated programs and services to this segment, whether they are White Label products or other types of partnerships. Moreover, we will tackle the mobility needs of our clients, by developing new mobile applications and online platforms for their needs. Digitalization has changed the way we act, while the clients' needs are more focused on mobility, proactivity and seamless fleet management. During 2016, ALD Automotive will continue to innovate in this digital field and will launch some exciting new initiatives which will offer fleet managers and drivers useful and unique tools adapted to their mobility needs."

Dowling goes on to add that another project for medium term is that of telematics. Effectiveness of telematics is recognised in the European countries, but in Romania things barely start to move in this direction, he says. "We hope that this service will enjoy the same success on the local market, and from our discussions with the customers we are already witnessing an interest from them in regards to this type of technology," adds the general manager. "And in this case we are talking about a favourable change for all those involved, as well as leasing market trends that will lead to a reduction in costs and to a better relationship with our customers."

Furthermore, the company development objectives continue to be linked to electric mobility, says ALD's Dowling, and, given international and local trends, the company will continue its initiatives of supporting vehicle fleet greening and promoting electric and hybrid vehicles. "We wish to increase the number of customers trying out these technologies and we will also continue supporting them, as we have in the past, by specialised consultancy for a full diagnosis of their vehicle fleet and the identification of any areas to be optimised from an environmental and economic point of view," he concludes. Operational in Romania since 2005, ALD Automotive is the subsidiary of BRD - Groupe Societe Generale and the ALD Automotive group, counting 69 full time employees.

Caussade Semences Est Europa plans to grow by 12 per cent next financial year



Although the GDP rose by 3.7 per cent last year, the agribusiness sector was very challenging, with a slight decreasing trend for the whole industry. However, in terms of Caussade Semences Est Europa, the French-based seed producer and supplier of crop and fodder plants present in Romania, Bulgaria, Republic of Moldova and Hungary, things stood differently. Between 2013 and 2016 the company managed to increase its turnover despite the market bottlenecks, from 11 million Euro to 17 million Euro. In addition, next year it is expected to rise up by almost 12 per cent, according to Jean-Baptiste Jurbert, the general manager of Caussade Semences Est Europa and the international commercial director of Caussade Semences group.

"For us, Romania is a special country where we can grow a business, as it is very dynamic compared to France for instance, particularly for agriculture, registering more than four per cent growth in terms of GDP in Q1 this year," Jurbert tells The Diplomat – Bucharest. "Although the whole market decreased a little bit last year, we managed to grow because we are a young company and we have the capacity to increase. Our 2015/2016 French fiscal year ended in June 2016, registering 17 million Euro and we expect next fiscal year to achieve 19 million Euro," he adds.

For Caussade Semences Est Europa, Romania is the largest market among the region, representing more than 50 per cent of the business. Moreover, it is the only foreign country where the company produces and processes seeds. Around 50 per cent of the production goes to Russia and Ukraine, around 40 per cent goes on the local market and the rest in East Europe. The company operates a factory in Alexandria where it processes 2,000 hectares of seeds, representing 25 per cent of total Caussade group's processing in the world. It also comprises a research facility in Mircea Voda (Braila county), which emphasises especially sunflower and corn.

"We invest in human resources and we have started to invest a lot in Mircea Voda also, where we have our research department," says the general manager. "In the future, this location should become the most important part for sunflower. According to our 2014-2020 investment plan, we will keep investing in the research of sunflower. We increased our budget in Mircea Voda from 150,000 Euro last year to 300,000 Euro this year and we will keep increasing until 2020."

Caussade Semences Est Europa has more than 100 employees, of which 80 are in Romania. In addition, last year it almost doubled the local commercial team, from 13 people to 24 this year. The company has five per cent market share on the local market, including all products, while the highest figure is represented by sunflower with eight per cent.

"We are very proud to speak about our sunflower results," Iulia Cristea, marketing director of the company, tells The Diplomat – Bucharest. "We have the biggest market share among our crops, eight per cent. We have a product which is highly oleic and last year we've noticed a new trend among the farmers: everybody wanted to buy our product because of the high level of oleic acid. We gained 34.2 per cent market share, we were number one. We sold more than 42,000 hectares of high oleic sunflower in 2015. The target for 2016 is not only to maintain the same sales, but to have a healthy growth," she adds. Besides sunflower, the company has also new hybrids in terms of corn, rapeseed and new varieties of cereals.

Speaking about the latest geopolitical events and their possible effects, the GM confesses that Brexit could affect Romania's financial sector, compelling banks to become stricter in terms of granting loans to farmers, for instance. "From my point of view, Brexit will affect the financial segment of Romania," says Jurbert. "The main issue of Romania is that it needs to turn to bank loans to work. It is a dynamic country, but without money. For a farmer, it is difficult to obtain facilities from banks. Brexit will come like a shock and banks will be stricter in granting loans. And this is not very good for the business," he concludes.

In country since 2009, Caussade Semences Romania began a business relationship with Romania as far back as 2005 through the testing activities for its products. In late 2008, the company founded Caussade Semences Romania, which two years later split to form Caussade Semences Romania and Caussade Semences Est Europa.

Groupama Asigurari plans to see a profitable growth this year



Last year, the GWP (gross written premium) of Groupama Asigurari, one of leaders of the Romanian insurance market, amounted to 805 million RON (around 180 million Euro), showing a 13 per cent increase in comparison to 2014. For this year, the company targets at least five per cent year on year growth in terms of income and a 27 million RON (around six million Euro) in terms of profit. In addition, Groupama will continue to invest in innovation both in products and services in order to gain customers′ preference and consolidate its leadership in its main lines of business - CASCO, Household, Commercial Property and Agro insurance lines - while also prioritizing its life and health segments, according to Calin Matei, deputy general manager of Groupama Asigurari.

"This year's first semester was in line and even slightly above our objectives, especially on the lines of business which are for us a priority: property and personal insurance," Matei tells The Diplomat – Bucharest. "We are confident that by following our strategy and in line with our business values we are going to register increases in overall 2016. (…) We will focus on delivering the best services and products to our customers and to keep them as flexible as we can, in order to become the preferred insurer for the Romanians and to cultivate our relationships with all our partners. Our objective is one of profitable growth," he adds.

Romania's GDP rose by 4.3 per cent in Q1, the highest progress within the EU, but, according to Matei, there are other two indicators that show a healthy growth of the Romanian market. The median take-home pay of Romanians registered a 5.2 per cent increase in March 2016 compared to the previous month, while the number of unemployed persons has decreased by 5,000 compared to February 2016. "The correlation of these two indicators is a definite sign of a healthy, growing national economy, who will keep up this pace of development in 2016," says the deputy general manager. "The evolution of our market is closely related to the ones of economic and financial indicators, and all the industries that impact the insurance field have benefitted from an accelerated growth."

Regarding the Solvency II, that has been in effect at the beginning of this year, Matei notes that it seems to have a positive impact. "The companies were already prepared for the risk-based approach and for the more severe solvency requirements in order to prove they have enough capital," he says. "Solvency II means an opportunity for the insurance market to gain back its credibility, for reinforcing the partnership between insurers and customers and for the development of more sophisticated products," he adds. Present in Romania since 2009 and counting 1,550 employees in 2015, Groupama Asigurari is the insurance company with the biggest number of employees on the local market.

Leroy Merlin will reach 15 stores this autumn



French retailer Leroy Merlin, the second largest DIY (do-it-yourself) player on the local market, which purchased the local BauMax network in 2014, plans to open its fifteenth store in Romania in late August – early September this year, located in Timisoara, according to Frederic Lamy, the chief executive officer of the company. This comes after Leroy Merlin has completed the refurbishment process of six other former BauMax stores in the first half of 2016, namely in Constanta, Targu Mures, Cluj-Napoca, Bacau, Suceava and, most recently [late June], Iasi.

"Honestly, the trend for us is really positive," Lamy tells The Diplomat – Bucharest. "We are building a long-term company which is solid on a market that is consolidating. We are gaining lots of customers and we are gaining significant market shares, especially in southern cities. If you take into consideration the total DIY market, we have between 15-20 per cent market share in the cities where we are present. Moreover, in Craiova, for instance, we have even more than that. We managed to triple the turnover of the BauMax stores – an amazing performance – and we are growing with our native stores by more than two digits."

Two years ago, when Lamy first came here, the company had only one store. In late 2014 however, Leroy Merlin acquired 15 BauMax stores, deciding to transform 12 of them. The company dropped three DIY hypermarkets due to several reasons: one was in Chitila, close to its Leroy Merlin Colosseum store, another one was in Pitesti, the location being not satisfactory for the company, and the third one was in Craiova, where Leroy Merlin opened during that year its own DIY hypermarket. One year later, in 2015, it opened its third Leroy Merlin store on the Alexandriei highway in Bragadiru. However, although the rebranding process will end this autumn and the company will reach 15 stores, the CEO confesses that the plans for Romania are not over yet, without going into too much details.

"Romania is a country which is very promising," he says. "For me, it is a very stable economy. Romania has a constant economic growth rate, more than four per cent from year on year, and we can see increases in terms of revenues and profit for the whole market. Moreover, the most important aspect is that this is not a growth financed by inflation. So, there are a lot of things to do in this country. (…) In Bucharest, we have three stores that count up to 30 per cent of the business and the goal is to develop our presence here. We have several projects in the pipeline for this, but you will see."

Lamy also notes that he wants to consolidate the company, to increase the park of the stores, mostly in Bucharest and big cities, and, in addition, he wants to make each of his employees a shareholder of the company. If last year Leroy Merlin had 1,200 people, currently [early July] it counts 1,600 and by the end of the year the figure will rise up to 1,800. Leroy Merlin is part of Adeo Group, a network of more than 600 franchisees and stores in the DIY, tools, home decor and sustainable housing area.


Mazars: Romania, from ‘low cost' country to ‘best cost' one



Over the years, several positive aspects have attracted French and other foreign investors to Romania, including skilled, well-educated and multilingual workforce, geographical proximity, both growing internal market and exporting opportunities and political stability as far as business is concerned. Moreover, the competitive labour cost has always represented an asset, but now it seems that Romania is no longer perceived as a "low cost" country, but rather as a "best cost" one, confesses Dino Ebneter, country managing partner of Mazars Romania, a French-based fully integrated advisory service provider.

"Romania is not anymore a ‘low cost' destination, but rather a ‘best cost' one," Ebneter tells The Diplomat – Bucharest. "There are more and more success stories in various industries. After the IT clusters and the strong automotive industry, the Romanian aerospace sector is now growing rapidly and it is not the only one. (…) The business relations, especially the interest of French investors for Romania, are developing and growing."

Ebneter sees a positive economic evolution for the next months. According to him, a good harvest this year will have likely a significant positive influence on the GDP, although, on the long term, reforms are required to improve productivity in the agricultural field. "Also, the growth from an increase of export is more sustainable than a growth from domestic consumption financed by short term loans," he says. "It is a good sign that the increase of the productivity in agriculture and the exports are two priorities presented in the new project ‘Competitive Romania' recently launched by the Government for public debate. The small and medium sized business which are, can or would like to export need more support and finance," he adds.

All three main service lines of Mazars, namely accounting, audit and tax, have been growing double digit over the past 12 months. Its annual turnover exceeds six million Euro. Ebneter is optimistic also for the financial year 2016-2017, planning again a significant increase of headcount, over ten per cent.

"We have invested this year and continue to expand our fully dedicated transaction advisory services team," he says. "They will support investors in completing successful mergers and acquisitions and getting insights to the target company, based on a comprehensive due diligence and other services." For the future, the company plans to consolidate its fifth place on the Romanian market and further develop its financial, tax and accounting advisory practise. Present in Romania since 1995, Mazars' team comprises more than 150 people.

Orbis: First Ibis Styles hotel in Bucharest to be opened at the beginning of 2019



Currently, there are seven AccorHotels branded properties in Romania, a Pullman, a Novotel, a Mercure and four Ibis with all together 1,334 rooms. Orbis Hotel Group, which in January last year took over French hotel group AccorHotels operation in Eastern Europe, wants to increase the hotel network on the local market targeting a leading position in the coming years. The company sees development opportunities in Bucharest, as well as in Timisoara, Iasi, Cluj, Sibiu, Oradea, Pitesti, Ploiesti, Ramnicu Valcea and Tulcea. In addition, Orbis sees the potential mainly on the mid-scale market with Novotel and Mercure, its economy segment with the Ibis Family brands, but it also encountered in some cases demands for an upscale brand like Pullman. However, the plan will take roots starting next year with two new openings and, in 2019, Bucharest will see the first Ibis Styles hotel, according to Gilles Clavie, president and CEO of Orbis Hotel Group.

"Orbis priority to develop the hotel network is through partnerships with franchise and management contracts, considering also the opportunity in specific locations, and wherever it is viable, to purchase or develop through our own investments," Clavie tells The Diplomat – Bucharest. "We have already agreed on the opening of two new franchised properties in 2017: Ibis Styles, a new brand in Romania to be opened in Arad, and the second Mercure to be opened in Brasov. In addition to these, we just recently signed a management contract to open the first Ibis Styles hotel in Bucharest beginning of 2019, and plan more developments to come…"

Following the transaction, by acquiring a network of 38 hotels and entering new prospective markets like Romania, the company strengthened its leading position as the key hotel operator in Eastern Europe with more than 100 hotels. According to Clavie, Romania is a very promising market with great potential. With its growing GDP, favourable economic forecasts that will drive hotel performance, improving market volume, and increasing domestic demand it is one of the key markets in the region, an important element of the company's development strategy, he says.

"Hotel industry is closely linked to GDP growth and macroeconomic environment, and the current growth in Romania as well as in Eastern Europe is assessed a priori to be even stronger with a rising number of both international and local investments, boosting the demand in the business as well as in tourist segments," says Clavie. "If you look at the indicators, today we are in a good cycle and we do not have any signals that the cycle will be slowing down."

The CEO goes on to add that overall, the Romanian market offers a good balance between leisure and the business segments, having a mix of leisure in the Black Sea or in the Western part of the country and mainly business in Bucharest. This is valid also for the hotels of Orbis. In Bucharest, where most of its hotels are located, the business segment continues to be strong, but Clavie observes an upward trend on the leisure demand especially for the summer season. Bucharest is becoming a new hot destination for weekend breaks, he says, and more and more popular for individual leisure guests.

"Being the sole licensor of all AccorHotels brands in Romania and in the region, Orbis does offer a wide range of well-known and recognized international brands in different categories, having their own personality and values, giving a preference to the travellers," says the CEO. "Should our guests be on business or on leisure trip, we face changes in their behaviour and emerging trends particularly related to gastronomy. Nowadays F&B is a crucial element in the customer satisfaction. This is why Orbis has developed Winestone, its own innovative midscale F&B concept, already deployed in Eastern Europe, including Novotel City Centre in Bucharest."

Due to the transaction in 2015, Orbis considerably increased its business scale. It noted double-digit growth of major indicators. However, analysing pro-forma figures, which excludes the effect of one-off events, due to both sales and revenue management actions and favourable economic conditions Orbis reported considerable RevPAR growth last year in all countries of the region (10.6 per cent RevPAR growth at the Group level). Improvement of operating figures resulted in an 8.3 per cent rise pro forma increase of net sales. Following a successful 2015 year, the company continued achieving solid operational and financial results in Q1 2016 in all 16 Eastern European countries where Orbis is operating hotels.

Jan Ptacek, GM of Renault Commercial Roumanie: "The growth of the market will be higher in H2 due to ‘Rabla' programme"



In mid-June, the national programme to stimulate the fleet renewal, ‘Rabla 2016', was launched and people have started to go to authorized producers to purchase a new car with low emissions, exchanging their old, polluting ones. Due to this fact, the automotive market will register a higher growth in the second part of the year compared to first half, according to Jan Ptacek, the general manager of Renault Commercial Roumanie, the entity which ensures the sales and after-sales services for the Dacia, Renault and Nissan brands on the local market.

"This year it will be a very successful year," Ptacek tells The Diplomat – Bucharest. "Why? Because the market is growing and we see that the potential for the growth in the second half is even higher than for the first half. Moreover, the growth for H2 will be also supported by the ‘Rabla' programme, which was just launched."

Ptacek goes on to add that Renault will have also a very positive development this year, as the company plans to renew its range of products, thus reinforcing its market position in Romania. "In Renault, it is clear that with all the models that we launch, we want to grow more than the market," he says. "We will grow in market share, because we are launching the new Talisman and the new Megane model. We will continue also to launch the limited edition of Renault Olimpic [inspired by the Rio 2016 Olympics] which includes Kadjar, Captur and Clio, which will support our results. In the second half of the year, we will prepare other surprises for the market, new models which are still to come."

Renault Commercial Roumanie is part of French-based Renault Romania Group. Present on the market since 1999, by taking over the Dacia carmaker plant in Mioveni, Renault Romania has around 16,700 employees and posted a turnover of 4.7 billion Euro last year. The company represents around three per cent of Romania′s GDP and eight per cent of the country′s exports due to the fact that more than 90 per cent of the cars manufactured in Mioveni are sent abroad. Since 2000, the investments made by the Renault Group in Romania amount to 2.4 billion Euro.

SG EBS keeps growing and plans to reach 1,000 employees in early 2017



French-based Societe Generale European Business Services (SG EBS), the nearshore shared service centre supporting the activities of the Societe Generale Group European entities, has registered a fulminant growth since its establishment in Bucharest five years ago. If in 2011 the company had started with only several employees, this year in late June SG EBS totalled almost 800 people and plans to reach the 1,000 mark in early next year, representing an almost 60 per cent growth from last year, according to Philippe Garcet, CEO of SG EBS.

"We still continue to have a fast growth," Garcet tells The Diplomat – Bucharest. "In terms of business, we had a 20-25 per cent growth in H1 and by the end of the year we will see an around 40 to 50 per cent rise, because we are not growing only in terms of headcount, but in terms of revenues and type of services we are delivering as well. We are planning to bring more complex and more added-value services. (…) As of today [late June], we are a team of 780 people and we foresee the figure above 950 by the end of 2016, not far from the 1,000 mark. However, growing from zero to 1,000 in six years in our industry is pretty fast."

Nevertheless, the general manager confesses that the growth of the company will not stop. Thus, by the end of the year, the company must decide whether to open another centre in Bucharest or to penetrate another city like Iasi, Timisoara or Cluj-Napoca as it plans to keep hiring several hundred people in the future. "Next year, it will not be the final size of the organization," says Garcet. "We expect to continue to grow. We have the capability to increase by three, four, five hundred people. But that should be more or less the target," he adds.

SG EBS operates in up to nine languages. Geographically, the centre focuses on Europe, with France representing 68 per cent, followed by Western Europe (24 per cent) and Romania (eight per cent). The company provides professional services in various fields of activity for 300 entities of the Group within 20 countries: finance & accounting, human resources and IT. The company is constantly increasing the complexity and number of services it covers and recently it started to deliver also some BPO (business process outsourcing) activities, such as back office operations, compliance and legal services.

"In our strategy, we want to diversify in three dimensions," he says. "First, we want to cover activities that we did not cover initially. We had finance, HR and IT and now we are targeting back office operations, compliance and legal services. The second axis is based on the existing activities, where we want to increase the number of clients we are covering. And last, but not least, we want to increase the number of services we deliver to clients," he concludes.

Sanofi: "To support growth, it is important to make healthcare a real priority"



Despite the local challenging healthcare environment, the political instability and the frequent changes of Health Ministry administration, French-based pharmaceutical company Sanofi Romania has kept its main focus on answering Romanians' healthcare needs. Sanofi confirmed its market leader status in 2015, according to the company data, with 12 per cent overall market share in volumes and 7.7 per cent overall market share in value, adding up to a 264 million Euro turnover. For the following period, the company confesses that local production capabilities, growing a strong and highly skilled team of professionals and increasing the access to the innovative treatments are top priorities. However, according to Emmanuelle Valentin-Fouchs, country chair Sanofi Romania and Moldova, maintaining local investments has become more and more difficult in the past few years with issues of policy making and lack of transparency making it hard to predict a plan for growth.

"The local pharma market faces a lot of regulatory challenges with tax regulations still suffering from a transparency point of view," Valentin-Fouchs tells The Diplomat – Bucharest. "We are confronted with a lack of clear long-term strategic vision that impacts business in our sector but also impacts people who already have one of the lowest life-expectancy rates in the European Union, five years below average according to Eurostat June 2015. (…) In order to support growth, it is important to make healthcare a real priority, to understand and act in accordance with all the studies that show that continuous investments in people's health is actually an investment with outcomes in productivity, labour supply, human capital or public spending."

The country chair goes on to add that authorities show an ever increasing interest in health reform and, over the past few years, important measures have already been implemented such as reimbursement list updates or negotiations for cost-volume agreements. However, while steps have been made in the right directions, recent discussions on updating prices with order 75/2009 have created strong positions and blockages on the market. "A new revised price policy legislation, taking into consideration all the market dynamics would be one of the most important decisions to further open the way for new investments, leading to a better access to innovation and in the direct benefit of the patients," she adds.

Sanofi already has a long term commitment in Romania to answer patients' needs and to contribute in increasing their quality of life, says Valentin-Fouchs. Following the 17 million Euro investments in its Zentiva factory, in the last five years the company has been constantly focused on developing its local footprint. Sanofi's 2016 investments will be directed towards its Zentiva factory in Bucharest, with 2.3 million Euro planned for this year.

"The regulatory environment stabilization and increased transparency in policymaking are a must in allowing us to advance with our local portfolio expansion," says the country chair. "In the near future, we are looking for new product launches in all business areas – cardiovascular, CHC, diabetes, multiple sclerosis, oncology, vaccines – thus increasing access to innovation for local market. Professional development for our team remains one of our priorities, with programs that will both increase skill development and specific knowledge but also further contribute to employee wellbeing and productivity."

The local team of Sanofi adds up to over 770 employees, where 420 employees work on the industrial affairs site and 350 on global operations. 67 million boxes of medicine were sold last year representing innovative and biologics, generics, consumer healthcare and vaccines for a wide range of therapeutic needs. Its diversified portfolio addresses more than 100 therapeutic areas such as diabetes and cardiovascular, rare diseases and multiple sclerosis, oncology, vaccines, generics and consumer healthcare.

Orange Romania reported revenues of 235.5 million Euro in Q1, up 6.5 per cent



Orange Romania registered in the first quarter revenues of 235.5 million Euro, up 6.5 per cent from the same period last year. The telecom operator reports just over ten million customers of which 48.2 per cent are subscribers and 51.8 per cent PrePay services users, the company announced in late April in a press conference. Orange TV service registered 294,000 subscribers, an increase of 54.5 per cent compared to the same period last year, while in terms of Orange TV Go the number of app downloads and updates has reached 1.8 million, up 11 per cent compared to the end of 2015.

"For us, 2016 will certainly be the year of convergent offers," said Liudmila Climoc, the new CEO of Orange Romania, quoted by a press release issued to The Diplomat – Bucharest. "With the new fixed services of Internet, voice and television, Orange will complement its portfolio and will focus on bringing the highest quality to customers, as it does on the mobile services segment. The network quality is still our priority. Our attention focuses on maintaining leadership on 4G and network performance, to bring 4G mobile Internet closer to customers across the country."

Mobile Internet traffic doubled compared to the first quarter of 2015, and 4G data traffic increased by four times in the same period, the increase being supported by the doubling of tablet sales. Over 60 per cent of customers opted for a 4G tablet. Comparing this year to 2011, to highlight the evolution of the company, data shows that mobile Internet traffic is eight times higher in 2016 compared to five years ago, and the traffic recorded in March 2016 is greater than all the traffic recorded in 2011.

"We can be proud that we are already the largest European convergent operator, providing customers with high-quality connectivity solutions, through fibre and 4G," added Gervais Pellissier, deputy chief executive officer and executive director in charge of European Operations Orange. "We will continue through the acceleration of the implementation of these solutions in our subsidiaries, to provide each Orange client under the European footprint of the Group the same high-standard services, the same unmatched Orange experience. Customer-centric vision, excellent connectivity and innovative services that meet our customers′ needs are core components of the execution of our Essentials2020 strategy in Europe."

The press release also read that the number of smartphones sold increased by 30 per cent, which means that the percentage of customers who prefer to purchase smart phones grew from 50 per cent to over 75 per cent in 2016. Currently, Orange provides mobile Internet access at 4G speeds for 72.1 per cent of the total population and 96.2 per cent of the urban population.

CEO of Veolia Energie Romania: "The legislative changes of the last few years made it harder for our business to survive"



In spite of the numerous market turbulences, mainly due to many changes in the political environment over the last few years, the French investors still consider Romania as an attractive market, says Frederic Faroche, the country CEO of French-based Veolia′s energy business line in Romania. According to him, its long-term potential is given by the economic growth so far, the population and the GDP. Another important factor that the CEO is tapping is represented by Romania's economic trend that, according to him, will probably remain stable- if not ascending- due to the European funding opportunities and the growth in household final consumption expenditure. However, Faroche confesses that it would be inaccurate to say that the political environment did not have an impact on the company′s activities.

"The legislative changes of the last few years made it harder for our business to survive, especially in our main field of activity, the district heating," Faroche tells The Diplomat – Bucharest. "Romanian legislation does not provide aid and sustainable framework for the operators producing heat and electricity in high efficiency cogeneration. The consequences are translated as a direct negative impact on the investments we make, knowing that they are in correlation with the company′s EBITDA. Given the situation, the perspectives are not of the merriest."

Nevertheless, the CEO notes that Veolia Energie in Romania will continue to meet the commitments it has taken towards the inhabitants of the cities it is present in and to try and develop a better communication and understanding of the issues it is confronted with, along with the solutions it wishes to implement for the sake of the citizens′ well-being and the environmental protection within the local and central administration.

"Apart from the Individual Metering with Horizontal Distribution Project that we intend to develop at a larger scale, as we believe it is one of the best solutions for efficient economies of costs and resources, the Group′s intention is to enlarge its portfolio by bringing its solutions and expertise in industrial services to the market," says Faroche. "We intend to adapt our approach to the needs of the society and the market's expectations," he concludes.

Veolia is the largest private producer and provider of energy services in Romania. The Energy Division of the Veolia Group has been on the market of energy services in Romania since 1992, its operations including heat production, distribution and supply for heating systems in Ploiesti, Iasi and Otopeni, and energy management agreements for buildings and industrial operators. In 2015, the turnover of the energy business line of Veolia in Romania reported to the Group was of around 380.8 million RON (85.6 million Euro) with an average of 788 employees. For 2016, the company is expecting a decline of the turnover to approximately 373.9 million RON (around 84 million Euro) while the number of employees will remain fairly constant (estimated total number of 791 employees).



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