Americans continue to seek piece of local pie

The economic crisis has had a negative impact on all sectors of the Romanian economy, but US investors continue to invest locally and are optimistic about the future

July 2012 - From the Print Edition

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The Diplomat – Bucharest talked to managers of American companies present on the local market to find out how they are coping with the current economic situation and what their future plans are in Romania.
We are seeing a slight increase in American investors’ interest in Romania, which is encouraging. Recently, several important projects have been discussed which would increase the country’s attractiveness, and we believe that should continue in the future,” Sorin Mandrutescu, AmCham president, told The Diplomat – Bucharest about local US investment. According to him, Romania has many strategic advantages, such as emerging service areas, adaptability, human intelligence and ability to innovate continuously. With some adjustments in public policy and increased predictability, the number of foreign investments will continue to grow, he believes. “I think in the future investments in the IT industry will continue to develop, but no less important is to manage this growth and its sustainability. Also energy will be interesting, as Romania is attractive both for projects in the area of conventional resources and for ‘green’,” said Mandrutescu.
In addition, the Romanian Competitiveness Report released by AmCham in December 2011 indicates that Romania has a better return than average for each Euro spent on labor, suggesting that cost-effectiveness relative to productivity achieved can be an advantage for the country, and by default for strategic investment. Besides, there are many areas where the Romanian market is still emerging, which offer US companies the opportunity to make strategic investments. Another advantage is the speed of starting a business. And investors have noted Romanian companies’ high level of adaptability to the latest technology.
“Romania is in a favorable position from this point of view and has proved, more than other EU countries, it is more open to adopting new technologies and adapting easily to technological changes,“ added Mandrutescu. Last but not least, the United States has always enjoyed a favorable climate in Romania, a good image and many supporters of the ideas and strategies that it has brought to the economy and business.

Amway to invest USD 370,000 in Romania this year

“The main objective behind the USD 370,000 strategic investment is to provide the company’s distributors with a professional space where they can come with clients or their partners to present to them the company and the Amway business model, and allow them to purchase any of the 450 products in our portfolio,“ Ioana Enache, CEO of direct sales firm Amway Romania, said of the opening of the Amway business center in Bucharest.
The center covers an area of 600 sqm and is divided into three areas: space for business discussions, a commercial space where entrepreneurs can buy from the Amway product portfolio and a training room equipped with the latest technology.
The investment also includes the facilities of the company’s new headquarters, located in Bucharest, and an online platform.
The center organizes professional development courses and presentation sessions of products supported by the company’s specialized consultants. It is aligned to the standards of Amway business centers opened in other European cities such as Vienna, London, Istanbul and Munich. In 2011, Amway Romania had a turnover of RON 78 million. Cosmetics and personal care products made up 41 percent of sales, health and nutrition 26 percent and home care products 33 percent.
“This year we want to post one-digit growth, we want to get Amway back on strong legs, to be sustainable and to launch new products. The luxury cosmetics market has begun to recover. The Romanian market has potential,“ added Enache. Amway Romania now provides more than 450 products to over 40,000 private entrepreneurs and clients across the country.

Smithfield beefs up investment

Smithfield is another US firm active locally. “In the future we plan to support the increase of production capacity of our factories and diversify our range of products. This growth of production capacity is driven by the new development opportunities that have been made by the approval of the Channeled System (SC) of pork production in Romania, dedicated to getting it on the EU market,“ said Bogdan Mihail, president of Smithfield Romania.
The company’s main activity is rearing swine, feed production and the purchase and storage of cereals, and the firm is also the largest buyer of grain from the Banat region, with over 250,000 tons of grain purchased per year.
So far, Smithfield’s investment in Romania amounts to USD 600 million, of which USD 500 million has been invested in the farms division and USD 100 million in the processing unit.
“The initial decision to invest in Romanian agriculture was due, on the one hand, to the long tradition of raising pigs in the west of the country, and on the other, to the agricultural potential supply of cereal products locally, which are needed for animal feed,” said Mihail.
Currently, Smithfield Romania manages several pig farms, two compound feed factories, a meat processing factory, a factory processing animal by-products, and a network of warehouses and logistics to ensure the fleet and market its products with better control of product traceability to the final consumer (from farm to fork).
Most of the farms owned by Smithfield are greenfield investments, and the others have been upgraded in accordance with all European requirements in the field. The company also owns two combined feed factories with a total capacity of 110,000 tons of grain and a total production of 7,000 tons of feed per week.
“Also, every year we invest in upgrading existing production facilities and units, in order to streamline all activities of the group companies, investments that will certainly continue in the coming years,” said Mihail.
Besides breeding swine and running compound feed mills, Smithfield has its own local slaughterhouse, Smithfield Prod, located in the former Comtim factory which currently produces about 30 percent of carcasses in Romania. It has the capacity to slaughter 600 animals per hour, and currently takes the whole flock from Smithfield farms. Smithfield Prod operates three units: the Freidorf slaughterhouse, a station processing animal products and a wastewater treatment plant.
In 2009 Smithfield Foods completed the acquisition of Agroalim Distribution, a company that has a complete storage and distribution network for fresh, frozen and canned food with national coverage. Smithfield also owns 50 percent of the assets of Frigorifer Tulcea (purchased in 2005, from Agroalim Distribution), a vegetable processing plant and cold storage for fresh, frozen and preserved food, located in Tulcea, which is, moreover, the only producer of frozen vegetables in Romania, with a production capacity exceeding 100 tons per day.
“Smithfield, through the three group companies, has created over 2,000 jobs. Our employees, both urban and rural, work like professionals, whether they are specialists in agriculture, quality control, butchers, or in support staff departments: logistics, maintenance, financial or elsewhere,” said Mihail, adding that the investments the firm made in 2011 and continues to make are intended to improve environmental issues, animal welfare and food quality and safety.

Microsoft goes west

Software giant Microsoft has seized on Romania’s IT talent to grow its operations here rapidly.
“Microsoft’s dynamic in Romania is incredible. For instance, we have announced that in July we will open a new center in Timisoara where we plan to hire 15-20 engineers over the coming months,” Michal Golebiewski, marketing and operations director at Microsoft Romania, told The Diplomat – Bucharest of the latest investments of the American company in Romania. The Timisoara center will be part (and an extension) of the Global Technical Support Center opened five years ago in Bucharest.
The center today employs over 200 highly skilled engineers serving the most demanding Microsoft enterprise customers in Europe and is the biggest center of this type for the firm in Europe.
Currently the main areas for Microsoft growth are its retail business, compliance, which means ensuring companies use licensed software (the overall software piracy rate in Romania in commercial space has fallen to 63 percent in the last year, part of a seven-year trend), business solutions for mid-sized and large enterprises and software as a service (or cloud) solutions for small and medium businesses.
“On the local IT industry, we’re committed to leading investments in the local software market to create innovation. For instance, we’re investing USD 250,000 in 2012 in moving the software developers to the cloud,” said Golebiewski, adding that while 70 percent of Romanian entrepreneurs see IT as playing an important role in business growth and as new technological innovations such as cloud computing will produce 14 million new jobs by 2015 at a global level, he is particularly optimistic about the business value of the company and demand from the market.
Also, the marketing and operations director added that during the crisis the market had shrunk, but last year it registered growth.
“According to International Data Corporation (IDC) the market is growing by 2 percent every year. Consumers have started to buy many computers and businesses have started to invest again. It’s not like five or ten years ago, but the market will increase in line with IDC predictions,” said Golebiewski. On the other side, Tudor Galos says that the consumer segment is one of the most important areas for Microsoft.
“In Romania the company employs 19 people who only deal with the consumer segment. In the future the consumer segment will be connected to the cloud,” added Galos.

Xerox focuses on SMEs

Xerox shares a positive take on recent developments on the local market. “Since I came into the Xerox management, for one year and seven months there have been many very good things that have happened, but at the end only results matter. What is important is that for us 2011 was a good year, a year of returning to growth.
Last year almost all market segments, nearly all clients, felt the need for additional power after the hard years of 2008 and 2009. In the first half of the year especially they began to reinvest, to resume trading and growth. I share the idea that much of the business happens at SMEs,” said Gabriel Pantelimon, country general manager at Xerox Romania.
He added that early 2012 was a rough time. Amid global issues, people started to put money aside, to delay projects and postpone investments. “Right now, after six hard months I believe we will see a stagnation of business year on year. Although at the beginning of the year we hoped for an increasing trend, it was not so. If we look from month to month things are on an upward trend, but if we compare to last year, things are going wrong,“ said Pantelimon.
The main problems are related to the market. People are still postponing purchasing decisions and projects, waiting to see how the global crisis will evolve. But at some point growth will resume. In addition, Romania is a country that has not reached its potential in many areas, believes the GM.
“In IT there is room for much improvement. It is a temporary situation, but we will not know how long this crisis will continue,” added Pantelimon.
At the beginning of this year Xerox launched in Romania Xerox Partner Print Services, a program that aims to support end-clients’ business, in particular that of SMEs, by offering them document management services through its partner network. So far three partners have already been accredited in this program: Asseco SEE, 2U and Comserv ETA, which will provide printing services to SMEs in the south of country, Transylvania and Moldova.
In addition, last year Xerox Romania consolidated its market share on the laser printer segment, both in value and volume of sales, following a business strategy focused on SMEs.
The number of units sold by the company increased by 72 percent in 2011 compared with 2010, according to IDC data. Xerox Romania’s market share in volume reached 12.6 percent, up from 8.5 percent in 2010. This year the company, which grew 15 percent in 2011, wants to maintain the upward trend, according to Pantelimon.

Google to boost local online realm

Google is also upping its Romanian presence. “The Google Romania office was opened in November 2010, but Google products have been present on the local market for many years.
We opened this office in order to have a local presence, to adapt the corporate strategy to the realities and needs of Romanian users. This company was born and anchored in online and its main goal is to develop this environment,” Dan Bulucea, Google Romania country manager, told The Diplomat – Bucharest about the company strategy.
According to him, online is a healthy environment with economic impact that allows people to easily access information, share, analyze and use.
Developing the online environment requires support for companies that can make better value from their online presence in the way they promote themselves, and help for consumers to find products and services more interesting and relevant to them.“We want to help develop this environment. Last year we had some localized product launches, an office was opened along with the launch of Street View in Romania, then we had the launch of Navigation Maps. For companies I can mention some interesting programs, such as Engage for marketing and media agencies,” said Bulucea.
Besides this, the company has made constant improvements to the search engine and to various localization tools which are both to reach users and those who want to promote something, and this year it will continue in this direction.
During the crisis, online has been the only growing segment, and this is no accident as it is an environment that favors efficiency and allows measuring, productivity and better interactivity. All these are advantages that lead to its development and from this point of view Romania can greatly increase, given that only a fifth of Romanian companies have an online presence.

Intel’s main focus for this year: Ultrabooks

Similarly, Intel remains active. “Every year Intel launches a new product line. This year we launched the third family of Core processor and that is in effect our focus for 2012.
These processors are found in netbooks, laptops, desktops and ultrabooks. Intel is focused on selling processors, especially in ultrabooks,” said Manuela Oprisan, Intel PR manager for Central and Eastern Europe.
According to market research firm IDC, 115 models of ultrabooks are due from various manufacturers worldwide, by the end of 2012, a high number for a product that has been on the market for less than a year. Of these 115, 30 will have touchscreen technology. The ultrabook is considered to be the next device for the consumer, says Oprisan.
“We want as many consumers worldwide to make the transfer from laptop to ultrabook. It is our number one job this year. We say that there is an audience for each mobile device,“ added the PR manager.
In the last three years Intel’s interest in Romania has grown considerably. In this period the number of employees has increased from 10 to 400, according to the company.
“One of the main reasons we opened the software center here was the taxation law for software people, which basically means that their wages are not taxed. Then there is our geographical position, neither eastern, nor in Western Europe. The west is a center of research in IT. Also Romanians have a native talent and that must be exploited and cultivated,” added Oprisan.

Louis Berger active in key infrastructure projects

Involved in the repair and modernization project for one of the most discussed Bucharest-based projects, the Lia Manoliu stadium, which became the National Arena, Louis Berger has developed more than 100 major projects in Romania, in road and railway infrastructure, environment and utilities infrastructure, regional and economic development, waste management and energy, according to data provided by the company.
It is currently involved in over 20 major repair, modernization and new construction projects in the area of transport and environmental infrastructure at a regional or national level, amounting to EUR 60 million.
“Environmental and green projects are very important to us, in terms of business-wise indicators, and we have successfully completed seven ISPA (Instrument for Structural Policies for Pre-Accession) projects, after being involved in all major programs targeting utilities and urban infrastructure and the institutional development of central and local authorities: MUDP, SAMTID, FOPIP and PHARE. Also, in urban development, we are involved in the repair program of 106 schools in Bucharest, a project financed by the European Investment Bank (EIB),” said Silvia Dulgheru, business development manager for the CEE and CIS region at Louis Berger.
In the transport sector, which is one of the core sectors for the company, Louis Berger is continuing its over 20 years of experience in Romania with new cohesion fund-financed projects such as the Timisoara-Lugoj highway, a section of the Romanian part of European Corridor IV.
In April, the first segment, 9.5 kilometers of the highway, was 28 percent completed, more than 10 percent behind schedule. The completion date for this segment is April 2013, and its construction value is estimated at EUR 49 million.
The highway will link Timisoara to Lugoj, an approximate distance of 35.1 km. The project totals EUR 330 million, out of which almost EUR 230 million came from the European Union. Louis Berger is the engineer supervising the works under a EUR 5 million services contract.
The company has expressed interest in continuing developing Romanian infrastructure and will focus on upcoming airport infrastructure modernization in Constanta, Iasi and Oradea.
Transport is not the only sector of interest to Louis Berger. Projects in the waste management and energy fields have also caught the company’s eye.
Within Louis Berger France’s international operations, which have an annual turnover of around EUR 70 million, the company’s activities in Romania make up 10 percent of the total company net revenues. The Central and Eastern Europe division, managed from Bucharest, contributes 45 percent of the overall turnover, said Dulgheru.
The Berger Group of companies set up Louis Berger Romania SRL, which employs several hundred Romanian experts. The first quarter of 2012 meant several new contracts for the Romanian operations, to support the sustainable development of the country’s infrastructure, with an approximate value of EUR 15 million.
According to Nicoleta Kalman, projects coordinator for the environmental sector, Louis Berger is involved in 12 ongoing projects financed through Sectorial Operational Programs (POS), most of them technical assistance contracts for management of water/waste water and solid waste infrastructure.
The average investment in such a project is estimated at EUR 80-120 million. As Kalman said, all 12 projects have to be completed by 2015.
An illustrative example of a complex investment contract is the project carried out for the water company in Constanta which is a regional operator for Constanta and Ialomita counties.
The project amounts to EUR 200 million (about RON 820 million), with more than 85 percent of the amount financed through EU Cohesion funds.
The firm’s Turda-Campia Turzii water project with SC Compania de Apa Aries (Cluj) is the most advanced, being more than 84 percent completed.
The investment value of the project, due to be finished this year, is about EUR 65 million (RON 280 million). Over 2014-2018, Louis Berger will deliver technical assistance services for similar projects in the counties of Sibiu and Fagaras, Bihor, Satu Mare, Covasna, Piatra Neamt, Vrancea and Buzau.
“The projects are more efficient when they are implemented regionally than locally, where regionally means multi-county, but also as a cluster or agglomerations within a county,” said Kalman. “The best example is the water operator in Constanta, Raja, which provides sanitation services in Constanta, Ialomita, Calarasi, Ilfov and Dambovita.”
Louis Berger is involved in integrated waste management projects which have started recently. Such projects are implemented at county or small region level and are difficult because they require political consensus and support, since every town or village must agree to join the particular association (IDA).
These projects aim to improve people’s quality of life and protect the natural environment, meeting the environmental protection requirements of Romanian and European legislation.
“Even though private-public partnerships are not yet a trend in Romania, the specialists at Louis Berger are keeping an eye on this segment, but we are awaiting more initiative in launching projects and a partnership approach from the authorities’ part,” said Antonina Petrescu, the coordinator of private-public partnerships at Louis Berger.
Potential solutions in this area would be, according to the company’s PPP specialist, partnerships at regional and local level, such as the one formed for the street repairs in Buzau, following an EBRD grant for the EUR 3 million project.
The system of public tendering in Romania, which Louis Berger’s representatives dismiss as being based solely on the lowest price, betrays an irresponsible approach that results in ineffective projects and delays due to never-ending appeals.
The Louis Berger official added of the current economic and political landscape,
“Political instability doesn’t help with the faster implementation of infrastructure projects. The current situation in Europe, combined with the low absorption of EU funds, creates difficult conditions for investments and that is why financing issues especially should be on the Romanian authorities’ priority list.”

Filling the Gap

US-based Gap International, a company specializing in B2B services, has announced the opening of a Romanian office, following a partnership established with local company NTT Partners.
The consultancy office will be led by Ionut Harabagiu, co-founder and operational manager of consultancy firm Brand Support, and Marius Caluian, the former manager for Romania and the Republic of Moldova of research company MEMRB, acquired by Nielsen in 2011.
According to Mitzie Hoelscher, chief leadership officer of Gap International, the company saw a large opportunity in Romania, as some businesses have increased a lot recently, and businesspeople are looking for new growing solutions.
NTT Partners and Gap International’s partnership formed the Institute for Exceptional Business Growth, which is also a member of AmCham and the Romanian-American Chamber of Commerce.
Anca Harasim, executive director of AmCham, said, “This partnership is meant to promote the reports drawn up by the institute. The idea is to show American investors that Europe and Romania represent a good area for investments, as we also showed in the previous report by AmCham in 2011, which included a competitiveness comparison of six countries in the region.“
Worldwide, Gap International’s portfolio includes Kraft Foods, Diageo, Astra Zeneca, Pfizer and Merck.
The local office of the US consultancy company will address segments where McKinsey, AT Kearney and Roland Berger Strategy Consultants have developed b2b product services.

Saatchi & Saatchi sees stabilization

The “two out of three” rule is the strategy adopted by the local Saatchi & Saatchi agency’s general manager, Radu Florescu, when it comes to thinking about pitches, accounts and agency team involvement.
The three coordinates of strategy, long-term account, profitability and creativity, that also attract awareness at major awards festivals, are the most wanted of all accounts within an agency.
“I never think in terms of small or big. If two of the three coordinates are met, I go for the account,” Florescu, CEO of Centrade Saatchi & Saatchi, told The Diplomat – Bucharest. “Prizes are amazingly important for a creative team.” Creativity has a very significant place in the company’s approach to accounts, adds the CEO.
Of course, as in any other business, the advertising market is not immune to the overall economic turmoil, seeing clients cut budgets and raising expectations of what can be done on the same budget, along with other constraints.
Still, with an advertising market estimated by Florescu to have decreased this year by 4 percent, slightly better than last year,
“We can speak about a certain stabilization“. According to a study by Initiative Media released at the end of last year, the market was estimated at some EUR 302 million, a decrease of 4.5 percent over 2010. The figures suggest the decrease has stabilized, argues the CEO.
With a significant portfolio of companies including Toyota Romania, P&G (Ariel, Head&Shoulders, Pampers, OLAY), Raiffeisen Bank, Intersnack (Chio, Fiesta), PSI (Love Plus), United Way Romania and Special Olympics Romania, the agency manager believes that “you get what you pay for“.
This means that the agency strategy is not to compromise on the balance between agency fees, budgets and accounts.
“I am a big believer in new business, whether it is about current accounts and new projects or new accounts,” Florescu said.
He adds that TV remains the strongest medium for advertising.
The company has a separate entity for the digital and online segments, which are equally important. “It is not only about the audience that it reaches, but also the messages that it transmits,” added the CEO.

New office and retail to occupy CBRE in next two years

Like last year, office and retail will continue to be the most active sectors, says real estate consultancy firm CBRE, and 2013 and 2014 will deliver big projects, especially in the Barbu Vacarescu and Orhideea areas.
Some of these projects were begun in 2011, while others have been and will be started in 2012.
“This increase is reflected in the evolution of the project portfolio at CBRE,” Razvan Iorgu, CBRE Romania GM, told The Diplomat – Bucharest. In retail, CBRE’s portfolio as exclusive leasing agent includes commercial centers such as Adora Mall Craiova, Cora Brasov and Corall Constanta, adding, according to the company, over 50,000 sqm of retail space countrywide in 2012 alone.
The company says that the industrial segment has also shown positive signs since the beginning of this year, although the wider picture is less rosy.
“The optimism has been dented by the news coming from the European region. There is intense activity in production and our ongoing projects are close to completion. Compared with the previous year, we are not seeing a shrinkage in the ongoing project volume which is good news,” said Iorgu.
In the overall local retail market, CBRE estimates that it delivered 26,000 sqm of space last year, with the last quarter of 2011 bringing the launch of commercial centers such as Maritimo Constanta, with 50,000 sqm of GLA, Galleria Arad (33,000 sqm), Oradea Shopping (30,000 sqm) and the extension at Baneasa Shopping City in Bucharest.
Also, this year has seen large retail projects reaching the launch stage, such as the recently opened Iasi-based retail compound, Palas Iasi. Since March 2012, CBRE has managed the leasing for 450 sqm within Palas Iasi for Librarium Group.
This is the second leasing contract for Librarium intermediated by CBRE, after the real estate consultant managed the rental deal of Petrascu House in Bucharest, in 2011.
The company’s evaluation department is also considered to have posted a good performance so far. According to Iorgu, this department did an evaluation project for over 1,000 properties owned by a bank.
The office department notched up leasing contracts for 66,000 sqm in 2011, representing tenants and owners in Bucharest and elsewhere, including White&Case, HP, Genpact, the Romanian Commodities Exchange (Bursa Romana de Marfuri), Aecom, Pfizer, Dell, Nokia and McDonalds.
The company also announced the start of renegotiating the leasing contract for 10,000 sqm within Prologis Park Bucharest by Keuhne+Nagel, a significant storage transaction, representing 5 percent of the overall nationally transactioned area of 200,000 sqm in 2011.
Meanwhile, CBRE worked on the leasing of a 2,700-sqm production unit and the 5,000-sqm concrete platform within industrial park West Park Ploiesti by American oilfield products and services provider Halliburton, the US company’s local market entry.
The CBRE manager says that the second semester of 2011 recorded the largest level of commercial center deliveries since 2008. By yearend, CBRE estimates that other retail projects will become operational, such as Auchan City Crangasi, Cora Rahova, InterCora Mihai Bravu, Ploiesti
Shopping City and Cora Bacau.
Overall, in 2011, the total office leasing transactions for A and B class office space is estimated by CBRE at 262,000 sqm, with an average rental estimation of 1,200 sqm.
The consultancy company expects a similar level to 2011 this year, but the office department aims to increase its market share from the current 20 to 30 percent.

ExxonMobil commits to exploration investment

In November 2008, OMV Petrom and ExxonMobil Exploration and Production Romania Limited signed a farm-out agreement under which ExxonMobil acquired a 50 percent working interest and a right to operatorship in the deepwater portion of the Neptun block in the Romanian sector of the Black Sea.
In 2009-2010 Petrom and ExxonMobil conducted a 3,170-sqkm 3D seismic survey of the block.
“This was the largest seismic program ever undertaken in Romania and employed state-of-the-art technology. However, even with the information from the 3D seismic survey, in order to determine the presence of hydrocarbons the company needs to drill a well, the so-called wildcat well,” Ian Fischer, managing director of ExxonMobil Exploration Production Romania Limited, told The Diplomat –Bucharest.
According to company information, to support early exploration drilling in the Neptun block, ExxonMobil and OMV Petrom contracted Transocean’s Deepwater Champion drillship.
The Deepwater Champion is the sixth and latest generation heavy duty drillship specifically designed for access to and operations in the Black Sea.
“The next step is to carry out further exploration work on the Neptun block and the plan is to do more seismic acquisition in 2012. Given the size of the block, the water depth, the challenges of bringing a suitable drilling vessel into and out of the Black Sea, and the technical challenges associated with drilling at these depths, it will take some time to plan and execute further exploration on the block. It is not possible to be specific on timing at this stage. However, if further work confirms the feasibility of developing the field technically and commercially, the first production would be expected towards the end of the decade at the earliest,” said Fischer.
ExxonMobil and OMV Petrom each have a 50 percent share of the project and each is making 50 percent of the investment.
“For both ExxonMobil and OMV Petrom this is a significant financial investment at considerable risk. Because of the technical complexity, the cost of a deepwater well can be as much as 10 times higher than that of a shallow-water well in Romania, and more data and analyses are required in the exploration phase to determine the commercial viability of the project,” said Fischer.
On the main challenges the company faces in Romania, he added, “Given the long timeframes and the high costs of the projects we undertake, a key factor in enabling long-term investment decisions is the stability of fiscal and regulatory terms over the life of the project. Without fiscal stability, project economics and therefore investment decisions can be significantly jeopardized. This is the same for the Neptun project just as it is for other major developments around the world.”
Deloitte Romania aims for large projects and privatizations
Locally, the audit company remains the crown jewel for Deloitte Romania, following the international trend registered by the company.
“In Romania, taking into account the percentage in the total turnover, our main performers are the audit segment, followed by fiscal consultancy, financial advisory services and business consulting. In Romania all these functions are very active. Obviously, in the boom period the financial consultancy part was spectacular, notching up many sales, M&A and privatizations. Overall everybody has been hit in this segment during the crisis,” George Mucibabici, chairman of Deloitte Romania, told The Diplomat –Bucharest.
In his opinion, an interesting evolution has been seen in business consultancy.
“The segment is increasing as it incorporates several elements with a growing trend, meaning applications for state aid, EU funds applications and technical consultancy, especially in the public sector,” said Mucibabici.
“During this period we are seeing great interest in consultancy for companies’ reorganization internally, in order to improve the business processes.”
The company’s focus remains on large national projects.
“In financial consultancy we have some solid mandates and our focus is on large privatizations and on the large projects which will hopefully be re-launched in public-private partnerships. Last year brought the launch of an important project, namely the Rahova-Voluntari subway, as well as the Comarnic-Brasov highway,” said Mucibabici.
The company is also assisting Hidroelectrica with the Tarnita-Lapustesti project and also with CFR Marfa’s privatization.
In terms of framework challenges, the Deloitte Romania chairman considers the political ups and down extremely unhelpful.
“The two elections this year will present issues as the public sector will see a lot of changes and we will have to start all over again in relations with our partners. New ways of thinking as regards the use of European funds have appeared, and opinions which prior to the recent election were widely held are now less so. What I do not know is how much this is because of government wants to criticize what was done before just because it was done by the previous government. It’s slightly Sisyphean but we live in interesting times,” said Mucibabici.
He concluded by saying, “The company’s expectations are high but we do not have as far-reaching ambitions as before the crisis.”
GE sees energy as main driver locally
2011 was a good year for GE’s energy business in Romania, providing customers with both technology and capability to produce energy more reliably and efficiently, more cost effectively and with greater environmental awareness, especially on the renewable energy side of business.
“Obtaining investment capital was much more challenging. As a result, potential investors were more hesitant to approach large opportunities and focused on low-capacity projects, making the progress towards a local sustainable and secure energy path slow,” said Cristian Colteanu, GE president and CEO for Romania, Bulgaria and Moldova.
According to him, the energy landscape in the European Union has also been transformed. Every member state has accepted national targets which, together, will realize the overall objective of the 20-20-20 Agenda.
Every member state is therefore committed to implementing ambitious energy efficiency action plans, also facilitated by a mature regulatory environment favorable to investment as it is in Romania.
As an active player in the energy domain, both as a supplier of technology but also as an investor, GE sees this opportunity as important for the country’s competitiveness and future economic performance within the region, says Colteanu.
What has happened in the financial markets during the crisis in the past few years could happen in the world’s energy markets next, if building up energy diversity and cooperation is not made a priority. In order to achieve that, long-term policy objectives should be established, argues Colteanu.
This will allow both the generation of integrated plans and the creation of appropriate mechanisms (national and regional development funds, public-private partnerships, increased EU funds absorption).
It is equally important that authorities ensure the development of energy infrastructure, so as to support growth in energy demand and an integrated regional energy market, adds the president.
The energy strategy must also reflect state-of-the-art technology that maintains its applicability over time, so that all investment projects include efficient, productive and high-performance equipment, which is also compliant with EU environmental standards.
“For 2012, energy will remain the growth driver for GE locally. We will further focus on developing the wind and biogas segment, but industrial cogeneration, especially high-efficiency energy production, will be another area of interest. The strategy will therefore stay unchanged and we will continue to concentrate on long-term projects that help our customers gain a competitive position, while the Romanian economy evolves towards efficiency and performance,” said Colteanu.
Citibank Romania secures capital to meet market challenges
Citi is strategically focused on the world’s top cities, where it leverages its global footprint to deliver a consistent client-centric banking experience. It describes itself as focused on innovative, non brick-and-mortar distribution to provide “anytime anywhere” banking.
On the consumer side, there are four key priorities for Citi.
“First, our focus on developing simple and intuitive customer experience. Second, to expand our current offering with functionalities and capabilities that are relevant to consumers. Third, to proactively enhance online and mobile security. Finally, to build global platforms for the benefit of our clients, who are typically internationally mobile,” Tibor Pandi, general manager of Citibank Romania, told The Diplomat – Bucharest.
Citi’s share of non-performing loans is very low, at 1.5-1.6 percent, while the market average is above 14 percent.
Last year, the bank’s profit rose 25 percent to around RON 117 million (EUR 26.2 million), with the bulk of the growth coming from lending, which recorded an increase of 26 percent.
The bank managed to become number five in terms of net profit in 2011.
Its liabilities, 83 percent of which are client deposits and current account liquidity, totaled RON 5.14 billion at the end of 2011.
The bank’s capital rose 4 percent last year to RON 606 million, said Pandi.
In terms of challenges in the local market, the general manager said that the slow economic recovery has been particularly challenging for the banks.
“The anticipated growth last year didn’t materialize, consumer and business activity mostly failed to recover, legislators and regulators around the world are still making efforts to deliver much-needed clarity and consistency and public perception of banks remained rather negative in many markets. The other main challenge is to maintain the portfolio quality by working with the right clients, from the right industries and with the right exposures, while keeping an efficient cost management,” said Pandi.
In his opinion, the main short- and medium-term trends in the Romanian banking system include: increased financing pressures, reduced credit activity, disciplined cost control, branch network optimization, change of the competitive landscape and increased competition for “good” customers.
“The biggest immediate risk that Romania’s economy is facing is spillover effects of a potential ‘disorderly exit’ of Greece from the euro zone. It would trigger reactions from investors which we can’t predict. The essential question is whether they would set Romania apart from neighboring countries or treat it the same as the entire region. If Romania doesn’t stand out in a positive way, we could have problems,” said Pandi.
As far as Citibank Romania is concerned, the GM says he is confident that the bank can deal with the challenging environment – both economic and regulatory.
“We are well capitalized and we have the right strategy to overcome these challenges. In these times, we make thoughtful investments in people and our brand and we further build on the foundation we’ve already laid – including strong risk and expense management – to help us grow responsibly,” said Pandi.