The German approach: cautious optimism

Romania and Germany have always maintained tight economic bonds, but since the election of Klaus Iohannis as Romania's President the cooperation between countries seems to have deepened. German investors are currently more optimistic towards the future compared to previous years, but still prefer to keep a prudent eye open. Alexandra Cioboata (Lopotaru) talks to the German Ambassador, to AHK's GM and to other important players

2015-10-18 19:57:44 - From the Print Edition

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Germany and Romania enjoy vigorous economic relations, as Germany is Romania′s most important trade partner and one of the major investors in the country, after the Netherlands and Austria. The bilateral exchange between the countries reached 21 billion Euro in 2014, according to figures published by the National Statistics Institute (INS), where imports from Germany amounted to 11.2 billion Euro, up by 8.7 per cent compared to 2013 and exports were 10.1 billion Euro, up by 9.8 per cent. Furthermore, of all products exported by Romania last year, nearly a fifth went to Germany, mainly machinery and transport equipment, manufactured products and chemicals. On the import side, also about a fifth, at 19.1 per cent, of the products imported by Romania in 2014 came from Germany. Thus, German imports and exports growth was above the growth of about five per cent of the total Romanian exports and imports.

The country also has positive marks in terms of investments. The German direct investment value on the local market amounted to around 6.7 billion Euro (11.2 per cent of total FDI) at the end of 2013, up from 6.4 billion Euro (11 per cent) at the end of 2012, according to BNR data. Of around 20,600 companies with German capital registered in Romania, almost 10,000 of the companies are estimated to be active on the market, providing jobs to hundreds of thousands of Romanian citizens. German companies are present in all sectors, especially in the automotive industry and retail, but also in construction, energy and IT.

Besides strong economic ties, Romania and Germany maintain excellent political relations, German Ambassador to Romania, Werner Hans Lauk, tells The Diplomat - Bucharest, as the countries are close partners and allies in the European Union, in NATO, the OSCE (Organisation for Security and Co-operation in Europe) and other important international institutions. According to him, Romania and Germany pursue the same goals in terms of foreign policy, above all maintaining peace and security, and promoting respect for international law and treaties.

"Romania and Germany are especially united in leading the states of the Western Balkans, and the Republic of Moldova, closer to Europe," says the German Ambassador. "With regard to European policy, we strive to maintain Europe as an area of freedom, security and justice. Respect for human dignity and human rights throughout the world are at the very heart of these shared values. I am confident that the current challenges Europe is facing on several fronts, domestic as well as external, can only be overcome and will be overcome by fully upholding these principles and shared values, implemented in a true spirit of European solidarity. This will require huge efforts from all of us, including Germany and Romania, but I am convinced that together we will be able to master these challenges to our societies."

The Ambassador also notes a growing interest in meetings and personal exchanges this year, in both Romania and Germany at federal, regional and municipal levels, which often result in concrete projects of mutual benefit. According to him, the election of President Klaus Iohannis and his official visit to Berlin in February 2015 attracted a lot of attention in Germany, Romania thus coming to the notice of the media and a broader public, the political sphere and the business community. The same view is echoed also by the general manager of the Romanian-German Chamber of Commerce and Industry (AHK Romania), Sebastian Metz, who points out that the election sent a positive message to both potential and existing German investors in Romania.

"The election in December 2014 definitely had a good and positive influence on bilateral affairs built in the economical and political areas," Metz tells The Diplomat - Bucharest. "This is not based on the fact that Klaus Iohannis comes from the German minority, but because, through his activity as a mayor in Sibiu, he attracted a lot of German investors to the county, which developed pretty well. There was already a base of good collaboration and the effects were even more positive when he became President."

Mix between confidence and caution

In the first half of the year, the Romanian market benefited from macroeconomic stability. For the first quarter a GDP growth of over four per cent was reported, the government budget posted a surplus, 1.1 per cent of GDP at the end of July, while the current account deficit is shrinking and inflation is estimated to remain slightly in negative territory towards the end of the year. In this context, along with the election of Iohannis as President, German companies regained their trust in Romania as an investment location and are looking rather optimistically towards the future, according to a conjuncture report conducted by AHK.

Thus, 15 per cent of the German companies in Romania that participated in the survey assessed the economic situation as good, while over half (56 per cent) believe that the Romanian economy will perform better than last year. In terms of their business development, expectations for the current year are also positive. The number of companies which consider the current state of their company as being good increased to 54 per cent (2014: 50 per cent, 2013: 36 per cent, 2012: 42 per cent), while this year 75 per cent believe that it will improve (2014: 54 per cent). An improvement was noted in the turnover appraisal of the company. Thus, 71 per cent of survey participants expect increases in turnover. However, German investors are still conservative and prudential, says the general manager of AHK.

"The German investors - who answered to our questions in March and April - sense that their businesses are running better in comparison to last year and the economic environment has improved," says Metz. "According to what we feel, the FDI will increase further. Everybody is building additional production units so there is definitely an ongoing increasing investment of German operators who are already here. Furthermore, we have noticed a small and constant growth of interest of German companies who want to establish operations in Romania. There will be definitely an increase of investments and bilateral trade. Nevertheless, they are still conservative and prudential."

A more stable legal framework and greater predictability of policies are needed

The economic activities of the German business community have developed a lot this year and in 2014. For example Deutsche Bank opened a Global Technology Centre in Bucharest in 2014 and RWE entered the market for electricity supply activities. In the automotive sector, Daimler opened a gearbox drive assembly unit in Sebes, and Bosch inaugurated its second automotive technology manufacturing plant in Jucu, Cluj county. This year, Siemens opened an IT centre in Cluj in February, automotive components manufacturer Draxlmaier enlarged the capacities of its plant in Codlea, and the German automotive supplier Stabilus is planning to expand its production facility in Brasov. Other companies that announced expansion plans include Karcher, manufacturer of cleaning equipment, and Leoni, supplier of wires, cables and wiring systems. Another sector in which there is expansion is the retail sector, with the large retail chains Kaufland, Deichmann and Lidl continuing to increase their number of stores.

Romania has all the prerequisites for attracting more foreign direct investment from Germany and elsewhere in the coming years, German Ambassador to Romania, Werner Hans Lauk, tells The Diplomat - Bucharest, as it is one of the biggest markets in the region, with a motivated workforce and solid knowledge in technology, IT and engineering. Moreover, being an EU member and rich in natural resources, including fertile agricultural land, oil and gas, also represents an advantage for potential investors. However, according to him, two essential factors could enhance Romania′s attractiveness: a stable legal framework and a greater predictability of policies.

"In recent times, Romania has experienced growth rates which were among the highest in the European Union," says the German Ambassador. "Still, I am convinced that they could be even better. If well-known obstacles like the deficits in infrastructure and the inefficiencies in the public administration were overcome, Romania′s economy could develop even more dynamically. If a company is about to invest capital, it will always be taking a certain risk. Therefore, it is absolutely understandable that all investors want to know the precise conditions in which they will have to conduct their business in the coming years. So, from my point of view, ensuring stable investment conditions, i.e. a stable legal framework and greater predictability of policies, is the essential factor for attracting investors. This is true not only for German companies, but most probably for all potential investors."

In this context, the German Ambassador hopes that the recent decisions on massive tax-cuts will not deprive the Romanian state of its ability to invest sufficiently in important areas like infrastructure, the health system and education. "To me, a solid, predictable public budget and a reliable infrastructure framework and public services are imperative for securing Romania′s competitiveness and for achieving sustainable economic growth," he adds.

Nevertheless, when comparing the current investments status with the picture of Romania before the crisis, one may find that there is still much work left to do to in order to regain the same position. Ioana Hategan, managing partner of Hategan Law Office, one of the most important law firms in Timisoara and a one-stop-shop of German speaking companies, still sees a lot of confusion and difficulty when it comes to development of business strategies. On one side, according to her, new companies are still very reluctant to invest money in new projects or select Romania as a location for their investments. On the other side, existent ones gain more courage and are increasing production or developing new divisions, but not as a general trend.

"Although we have advised some newcomers in the first half of this year, we are still less attractive than we used to be before the world economic crisis in 2009," Hategan tells The Diplomat - Bucharest. "One of the most difficult problems is that we have almost no dynamism on the SME part, which is the actual ′body′ of an economy."

Although the Energy department of the firm registered a significant decrease due to the changes in the incentive model for investments in renewable energy, the Labour department registered an increase that "may show some real potential in the future," she says. "We assist a large German automotive producer with labour issues throughout the country," adds Hategan. "And our M&A and Real Estate departments registered new projects, that show a slight reinforcement in the investment area."

Next, The Diplomat - Bucharest takes the pulse of large German investors, stressing their business development in the first half of 2015, the challenges they still have to face and their objectives for the coming years.

Menzer, Noerr: German investors regained confidence and expect positive outcomes this year

This year, German companies started to regain trust in Romania′s economic environment and now plan to expand their business mainly due to the current political stability, the good macroeconomic indicators, the growth potential of the market and in no small part to the latest anti-corruption efforts, Joerg K. Menzer, managing partner at Noerr, one of the most important German law firms on the local market, tells The Diplomat - Bucharest. According to him, Romania has made great progress in recent years and offers opportunities in several domains like IT&C, healthcare/life sciences, manufacturing, automotive, retail, tourism, agriculture and energy. Nevertheless the infrastructure and the lack of transparency in public procurement are still subjects of improvement.

"There are several companies, some of them German customers of ours, that regained trust in Romania′s economic environment and look forward to positive outcomes and revenues at the end of the year," says Menzer. "Some plan new investments and have already created new jobs, others diversified their offers and business strategies for the same reason. Without a doubt, there is movement on the market. I assume that it has a lot to do with the fact that there are no elections in 2015. Political stability is an important aspect for foreign investors. What rounds up the macroeconomic perspective is Romania′s economic growth in the past months, the stable inflation and a low budget deficit. Clearly, these aspects played an important role in the decision-making of companies for further investments. Nonetheless, some downsides still remain and many of them are issues that public authorities need to improve: bureaucracy, lack of transparency in public procurement, infrastructure, to name a few."

Menzer goes on to add that several recent legislative changes also affected the business of Noerr′s clients. For example, increasing the claw-back tax resulted in cutting down jobs and further investments in pharmaceutical businesses. Also, cutting down the public investments in health, education or infrastructure had strong repercussions on the plans of the clients in 2015. In this context of constant changes of legislation, it is difficult to stay competitive, he says.
"Probably the most important legislative change that influences all business is the Tax Code," says the managing partner. "I recently read an article saying that there were more than 200 changes of the Tax Code in the past ten years in Romania. Businesses are losing precious time focusing nonstop on these changes, not to mention trying to understand them. It is decisive for every business to be able to plan in advance and have a certainty that the State doesn′t slide in and somehow tackle that plan. Hopefully, the new Tax Code published in the Official Gazette will constitute the base for a predictable fiscal environment in Romania."

Noerr has been involved in various major investments and M&A transactions as well as major litigations. The sale of bauMax, the acquisition by Mylan of part of the business of Abbott Laboratories, the acquisition of Asentinel International by Marlin Equity Partners and several other transactions, including major extensions or new investments in the industrial sector have been advised by Noerr. According to Menzer, one of the firm′s objectives for the coming year is to find the right balance between the strictly legal aspects of the job on one side, and development opportunities for the firm and its clients on the other side. "The markets nowadays change quickly and any entrepreneur needs to adapt to new conditions and developments," says the managing partner. "That is one major challenge for any kind of business and also one of our objectives - keeping up the pace and remaining competitive. In this context, one important change is being aware that we are not just lawyers working on solving the client′s legal issues any more, but partners that need to identify business opportunities in the region together with and for our clients," he concludes.

Hajdinjak, E.ON: Foreign investors, a source for growth

Romania shows favourable macroeconomic indicators and the following period looks positive, but it needs to further attract foreign investors as they are most important source for growth, Frank Hajdinjak, general manager of E.ON Romania, tells The Diplomat - Bucharest.
"I see some very good signs for the Romanian market in the coming years," says Hajdinjak. "If we take a look at the macroeconomic parameters of Romania, they are all very good. In comparison with other European countries, Romania has a higher growth rate of the GDP, while the unemployment rate and inflation at are a good level. We hope that the Government will keep these parameters on the same trend in the future also, which is very important. I generally see a very good development, but we need to attract more investments in all different sectors, because that is the most important source for growth."

Since 2005 when it became operational on the local market, E.ON has invested more than 1.3 billion Euro in Romania. Last year, the German investor injected about 94 million Euro on the domestic market, investments mainly directed towards modernizing distribution networks for gas and electricity. According to the GM, the target this year is to invest another roughly 100 million Euro, of which 80 per cent goes into the safety and extension of the grid. "We also want to strengthen our client portfolio by offering new products to our customers in addition to the standard commodity business," he adds.

The company currently provides electricity and gas to more than three million customers in 20 counties, about 457,000 more than in 2005. E.ON is the first integrated provider, but also the first integrated distributor of natural gas and electricity. The company provides electricity to more than 2,540 localities and gas to more than 1,000. In 2014, the consolidated turnover of the group of companies E.ON in Romania amounted to 4.83 billion RON (around 1.08 billion Euro). The volumes of natural gas and electricity traded stood at 29.6 TWh, remaining at the level recorded a year earlier.

Carpatcement′s GM expects to see six per cent increase on cement segment this year

Carpatcement Holding, part of German-based HeidelbergCement and one of the leading cement producers in Romania, became operational in 2004 and counts three factories on the local market, at Tasca (Neamt county), Chiscadaga (Hunedoara county) and Fieni (Dambovita county). Florian Aldea, the president and general manager of Carpatcement Holding is cautiously optimistic this year in terms of the Romanian construction market, which grew by 10.3 per cent in the first semester of 2015, mainly due to residential and non-residential work. This context has a direct and positive impact on the cement segment, says Aldea, estimating a slight annual growth between five to six per cent by the end of the year.

"It goes without saying that we have a lot of construction to do, and over a long time, to catch up with the other EU member states," Aldea tells The Diplomat - Bucharest. "We believe we will see in 2015 a slight recovery of the construction market, even though it will not meet its real potential; however, we believe there are premises for growth. There is also a general trend of increase in the cement market in H1 of 2015, mainly due to the residential and non-residential works."

Nevertheless, Aldea goes on to add that the future development of the cement sector hinges on several factors, especially on the appetite for investment on the part of private investors and corporations, which still lags far behind the levels reached in 2007-2008. "The market might move forward with the increasing attention of foreign investors which could open new production facilities in the country," says Aldea. "The infrastructure also needs more investment. The market potential is here, financing is available through EU funding and the convergence programs, so I am confident that gradually we will be able to consolidate trust and re-launch projects that are strategically important both at a national and at an international level - by following, for instance, the example of the Poles."
Speaking about the General Transport Master Plan that was recently approved by the European Commission, Aldea notes that it operates with two work scenarios. According to him, the optimistic scenario involves the completion of 47 transport infrastructure projects, a very good absorption rate of EU funds, as well as accessing external loans to make up for needed additional financing. On the other hand, the negative scenario envisages building just one new freeway and a needed supplementary financing of about 700 million Euro that is yet to be secured.

"The optimistic scenario could mean, for our industry, the main growth driver, at least for the length of the Master Plan time frame, which is to the year 2030," says Aldea. "I believe we have reasons to hope that things will closely follow this scenario, especially given that Romania might thus benefit from more relaxed deficit requirements and, additionally, could access over eight billion Euro in loans for the development of transport infrastructure. But for all this to happen, we must have stability and responsibility in the upper administrative and political decision levels."

With Carpatcement Holding, Carpat Beton and Carpat Agregate in its portfolio, HeidelbergCement entered the local market in 1998 and has invested over 500 million Euro across all its business lines (cement, ready-mixed concrete, and aggregates). The Group′s major investments were done in the upgrade of its three cement plants in order to protect the environment, amounting to about 41 million Euro overall. 2014′s most important investment was the one in increasing energy efficiency at its cement plant in Fieni, whereby a part of the heat generated during the manufacturing of clinker, heat that is now released in the atmosphere, will be recovered and converted into electricity, which in turn will be used for production. The project is still in its testing stage and has already generated its first MWh on July 26 2015, following an investment of about 83 million RON (around 18.6 million Euro), of which some 35 per cent is EU financing. The Group posted 185 million Euro in turnover in 2014, up by four per cent compared to the previous year, while profit rose by 22 per cent to 34 million Euro in the same period.

Continental Anvelope wants to increase the production of UHP tires

German tire manufacturer Continental Anvelope Timisoara wants to focus more on Ultra High Performance (UHP) tires, designed and manufactured for premium vehicles, according to Sorin Samonid, the general manager of the company. This comes in the context wherein July Continental announced a partnership with Jaguar for their XE version. The plant in Timisoara will supply 15,000 of the ContiPremiumContact 5 and ContiEcoContact 5 tires starting this year, for the Jaguar XE cars sold in Europe as well as on other continents.

"The automotive market shows significant signs of improvement," Samonid tells The Diplomat - Bucharest. "For the first time after many years of steep decrease, we are seeing constant growth, quarter after quarter. A comeback of the local market is important. Our main objective is to consolidate our operations in Timisoara by improving the products portfolio. We want to increase the production of UHP tires, which are the higher value-added products in our industry."

Continental has invested over 370 million Euro in its tire factory in Timisoara in its 15 years of activity on the local market and created around 2,300 jobs. In June this year, Continental Anvelope Timisoara inaugurated the first phase of its 10.5-million Euro investment focused on environment protection, after a series of tests started during the last quarter of 2013. The aim of this investment is to decrease the perception of the specific smell of the tires′ manufacturing process in the vicinity of the plant, says Samonid. "The implementation is going as scheduled, and by the end of the year all equipment part of this project should be operational, decreasing the specific smell," he adds.

Somonid goes on to add that the main reasons why Continental chose Timisoara for its expansion include the proximity to Western Europe, the university centres with tradition and the labour market that has the advantage of absorbing talented graduates. According to him, Continental provides various opportunities for young graduates with multi-cultural backgrounds to work together and gain local and international experience. For instance, in 2009, the engineers at Continental Anvelope Timisoara developed a virtual simulator used for the training sessions of the employees. This 3D simulator, implemented with the support of the Technical University in Compiegne, France, prepares the plant′s operators before they actually start working on manufacturing the tires. With this solution, the company managed to have a more efficient production process by reducing the quantity of scrap generated during the production process, but also to help the operator become familiar with the actual production process more easily.

"We want to continue the training sessions for our employees," says the general manager. "All these will help us comply with the demands of our customers, reduce the scrap from the production process and increase labour productivity. So the potential is there - the important thing for us, companies looking for skilled employees, is to cooperate with the educational institutions and develop engagement strategies to encourage the creativity of our future employees as early as during their student year," he concludes. Continental Anvelope Timisoara has delivered to date more than 150 million tires to worldwide customers.

Roudy, Metro: "We managed to implement the VAT cut in a transparent manner"

The VAT cut for food products that was implemented this year by the Romanian Government is without question the legislative change that had the highest impact on the market, Gilles Roudy, the managing director of Metro Cash & Carry Romania, tells The Diplomat - Bucharest. This will bring long term improvements in the consumption level, he says, offering to Romania positive economic perspectives by the end of the year.

"This year, both the cash & carry segment and the entire retail market faced a great challenge with the VAT cut," says Roudy. "The new legislation involved a great implication for every commercial chain; we were pleased to welcome this legislation which brings added value and immediate benefits to our customers. At Metro, we managed to implement the VAT cut in a transparent manner, so that our customers fully benefit from this change."

With nearly 5,000 employees, Metro Romania posted sales of 906 million Euro in the financial year 2013-2014 (Oct 2013-Sept 2014). The managing director expects a rising trend in the following years due to the development of the HoReCa sector, a segment that still shows growth potential, and due to investments in a new concept of ′LaDoiPasi′, the franchise system that offers specialized consultancy to small traders, which may also have a positive impact on the business, he says.

"This year, we focused on the redesign of the ′LaDoiPasi′ franchise, so that we come up with an improved format that best fits the needs of traditional traders," says Roudy. "In order to become an option for end consumers when it comes to daily needs, proximity stores must implement an offer of fresh products and also become competitive. We have tested different elements and we have come to a final, improved version of the ′LaDoiPasi′."

In terms of other objectives, the company plans to develop its initiatives in supporting the local producers with ′De-ale Noastre′ programme, having also in the pipeline an optimization plan designed to adapt Metro stores to local demands. At this moment, Roudy could not give further information on this program, but tells The Diplomat that he will provide more data in the near future.

Hochland Romania to focus on direct distribution and exports in the coming years

Becoming operational in 1998 on the domestic market, Hochland Romania, one of the main local players in the field of processed cheese and cream cheese, owns two production units on the domestic market, namely in Sighisoara and Sovata. With more than 320 employees, the company posted a turnover of 48.7 million Euro last year, expecting a stable or a small increase for 2015. Sorin Timus, general manager of Hochland Romania, tells The Diplomat - Bucharest that three of the company′s major targets in the coming years include the focus on a new business model of direct distribution, innovation and the development of the Hochland brand more and more in other markets in the region.

"Currently, we are transitioning to a new business model, based on direct distribution, after 20 years of indirect distribution," says Timus. "We want to be much closer to our clients - retailers - and consumers and the new model will help us achieve that. Moreover, Hochland will keep its focus on innovation for the local market, strengthening our market position and maintaining our brand awareness at the highest level. Exports will also be in our focus, as we have plans to develop the Hochland brand more and more in other markets in the region, like Republic of Moldova, Bulgaria and former Yugoslavian countries."

Analysing the local legal decisions that have been taken lately, Hochland′s GM says that he is relatively optimistic about Romania′s economic environment by the end of the year. The VAT decrease for all the products had a positive influence on the sales volumes of Hochland for the first two months after the decision was implemented. Moreover, the legal change is expected to further have a positive impact on consumption, on production, and also on reducing the black market. Nevertheless, the current international context could affect the local market, he says. "The salary increases for sanitary sector - and probably other budgetary sectors will follow - is also an important decision [that has been taken]," says Timus. "It should bring an increase in medical staff retention and more professional services on a long term. However, the international environment such as migration, the Russia conflict, the Greece situation, just to mention a few examples, can affect the micro-economic environment as well."

The main important project of the company this year is represented by an investment designed to increase its production capacity in the Sighisoara factory with a new machine for a new product in the tartinable cheese category. The project is expected to be ready this autumn. "The product is a great spreadable cheese coming in tubes, which makes it very easy to use; it is called ′Tartino′ and it will be launched on the market on mid-September," concludes Timus.

Miele Tehnica plans ten per cent rise by year end

Miele, one the world′s leading manufacturer of premium domestic appliances, achieved a turnover of 3.49 billion Euro in its 2014/15 business year which ended on June 30. This represents 267 million Euro or 8.3 per cent more than in the previous year. Miele Tehnica, the local factory of the company that became operational in Brasov in 2009, grows in parallel with the mother company and expects to see a ten per cent growth by the end of the year, to reach 40 million Euro from 36.39 million Euro last year, according to Hartmut Hohaus, the general manager of Miele Tehnica.
"Miele Tehnica grows in parallel with the mother company and plays its part in this overall solid business increase by actively sustaining the implementation of the Group′s strategy, know-how and structured development," Hohaus tells The Diplomat - Bucharest. "By the end of the year, there is a forecast to reach 40 million Euro in revenues."

Hohaus adds that Miele Tehnica is stepping into a new stage of its activity development in Romania. In this period, the company grows by opening a new division of software development in Brasov. The new division, serving the whole Miele Group, will create the new software programs for a wide range of Miele domestic appliances and products. One of the reasons that compelled the company to launch this project is the skilled labour force available in the city, according to Hohaus.

"This new investment confirms the trust Miele Tehnica won in relation with the Miele Group," says the general manager. "The new department will grow gradually, according to the future requirements of the company. A strong argument in support of the new division in Brasov is the fact that our city has a high IT workforce potential and a strong university centre. Starting in August, we have begun the recruitment and selection of the team which will support the activities and tasks of the new software development department."

Speaking about economic perspectives in general, Hohaus notes that according to the European Statistics Office, Romania is in the top three European countries related to the yearly economic growth with its current growth of 3.7 per cent, just one step behind Malta and the Czech Republic. This positive trend brings about further benefit growth tendencies regarding the manufacturing industry, sales and services and the need for workforce, he says.

"I am glad to see that Romania and several countries in Europe have embarked on an ascending path and I look forward to following a stable and sustainable growth, after so many years in which the word ′crisis′ was dominating the economy," he says. "The national statistics office has forecasted only figures in the plus range for the end of the year, and the representative of FMI declares that if Romania continues to grow steadily as it did in the last two years, it will stand the chance to outrank the Czech Republic, Greece and Portugal in not more than three years." Around the world, Miele employs a workforce of 17,741, while Miele Tehnica plans to exceed 200 people this year.

Gothaer Asigurari Reasigurari registers gross technical result of over two million Euro in H1

Gothaer Asigurari Reasigurari, the local arm of one of the largest insurance groups in Germany and present in Romania since 2013, registered in the first six months of 2015 gross written premiums of 36.41 million RON, outlining a selective underwritten portfolio, in a decreasing trend compared to the same period of last year, according to the company report. However, the gross technical result remained positive.

"In this development stage of the company, portfolios performance is fundamental to us and we are glad to see that the 2015 H1 gross technical result of the company is positive, amounting to over nine million RON [more than two million Euro]," says Anca Babaneata, the CEO of Gothaer Asigurari Reasigurari. "It is the result of the company′s efforts in taking the necessary steps for building a strong and sustainable operation. Yet there are still steps to be taken forward towards our development model, as we are not set to the maturity level we are expecting regarding the underwritten portfolios in order to maintain a positive net result. We witness a significant optimization of the net result though, by recording 2015 H1 net results of over 50 per cent more than expected for the first part of the year."

According to the same report, the insurance lines of business leading enhanced performances are mainly the agricultural insurances, bonds, and also motor hull insurances. Babaneata goes on to add that the company has to carry forward the same positive direction in terms of technical portfolio management and, at the same time, to resume the necessary growth rate in order to reach the business level of maturity and a business volume that sustains costs absorption and estimated claims level.

Gothaer group′s strategy of entering the Romanian market at the end of 2012 was based on taking over a small sized company, Platinum Asigurari Reasigurari, which became Gothaer Asigurari Reasigurari after a rebranding process in early 2013. At the end of 2014, the company recorded a volume of gross written premiums of 84.31 million RON (around 19 million Euro), up 26 per cent over the previous year, ending more than 97,000 new insurance contracts.

Bosch plans to invest about 55 million Euro during the next two years

Bosch has been present in Romania for more than 20 years and employs more than 2,700 people and associates in four entities. In 2014, Bosch generated sales of 210 million Euro in the country, says Mihai Boldijar, general manager Robert Bosch and Bosch Group representative in Romania.
The Bosch Group operations are divided into four business sectors: Mobility Solutions, Industrial Technology, Consumer Goods, and Energy and Building Technology. The company is based in Bucharest with its headquarters as well as a sales office for power tools and accessories, thermotechnology, security systems and products for the automotive industry. In Cluj, Bosch operates a research & development centre as well as a production unit for automotive technology. A production unit for linear motion technology and one for automotive technology are located in Blaj. Furthermore, the company runs a business solutions centre in Timisoara. In addition, in the capital there is a branch of BSH Hausgerate GmbH, active in the market of household appliances.

"Last year, the turnover for Bosch′s Automotive Aftermarket, Power Tools and Household Appliances divisions increased above the market average. At the same time, the company gained market shares in these three divisions. Bosch also maintained a leading market position in its Thermotechnology division and was especially successful with condensing heating boilers that meet the requirements of the new European energy efficiency directive," Boldijar says.

He adds on that in the next two years, the Bosch Group plans to invest approximately 55 million Euro in Romania mainly into the further development of its Mobility Solutions production sites. In Blaj, the company will establish a new production line for powertrain components. At the site in Jucu which was officially opened in May 2014, Bosch produces electronic control units for driver assistance and energy management systems for global automotive customers.

"With the opening of a new software R&D centre in Cluj-Napoca in April this year, Bosch also strengthened its local research and development activities. Here, teams of young engineers develop cutting-edge technologies in the field automated driving, alternate energy, and connected industry," he adds. In addition, Bosch also opened a new automotive R&D centre at its location in Blaj. The centre will focus on service to other Bosch locations in the areas product design, testing, validating, and project management. "By the end of this year, we expect a strong increase in the number of associates to more than 3,000 and a double-digit increase in revenue."

Boldijar also mentions that among the all well-known fiscal and economical KPI′s which every company has and are followed, Bosch strongly emphasises the level of satisfaction of the customers and associates. "As a main leadership topic and following our company values, we have a biennial associate survey. The results of this assessment are followed by improving measures in the entire organization. Also, the departments are conducting customer satisfaction surveys on a regular basis."
One of the major challenges that Bosch faces in Romania is personnel retainment. "Romania is an important hub for production, R&D, as well as service solutions and trade within the Bosch Group. One of the major assets we have is the creative, high educated and qualified graduates and engineers. On the other hand, the main challenge is to retain and develop these young specialists and here we strongly believe we offer a fair, market-customized package."

Boldijar explains that although the potential of the business environment in Romania is significant, there is a certain need of improvement especially in infrastructure, fiscal regulations and legal predictability, dual educational curricula for young students, to ensure the long-term attractiveness and competitiveness of the country.

"It is also necessary to attract more foreign investments and sustain the local entrepreneurs, by creating lean procedures for the state aid, simplifying the bureaucracy and creating start-up incubators. Romania needs to have a consequent and consistent strategy in this respect. This is the only way we can improve our perception to the outside, which is, unfortunately, still below the reality."

KWS plans an investment programme for Romanian farmers

In fiscal 2013/14, German producer of certified seeds for agriculture KWS Group and its approximately 60 subsidiaries and associated companies generated net sales of over 1.178 billion Euro. It has around 4,800 employees and a footprint touching more than 70 countries, including Romania. The company has invested in Romania since 2002, with the inauguration of KWS Seminte and besides its corn processing factory, research and breeding station, high tech equipment and facilities, the company launched the first accredited lab in Romania. KWS′s future projects for the domestic market foresee a wide investment programme, in order to answer the needs of the Romanian farmer, according to Doriana Nitu, country manager of KWS Seminte.

"Our focus is our partner - the farmer," Nitu tells The Diplomat - Bucharest. "Our intention is to give him a large range of opportunities, so he can create performance. Thus, if we continue to bring innovation, state-of-the-art technology, great genetics and a team of specialists, than we can talk about evolution and a future long-run partnership, and of course about collateral benefits such as creating new jobs and building talents."

Nitu goes on to add that Romania is a country with hard-working people and a lot of good specialists, a country that offers various opportunities. As a newcomer, one should not consider only the good figures, as competitive labour costs or positive economic growth. According to her, a real business investor learns what the expectations are, how the existing competitors act, what the market asks for and if there is still room for his product or service.

In terms of Romanian agriculture, the country manager notes that the sector is a very challenging industry, as one cannot rely on a template from one year to another. Regarding this year in particular, she says that the agriculture sector strived against a very intense drought, so the overall results will be according. Nevertheless, Nitu is optimistic about KWS Seminte′s results by the end of the year due to its positive product development.

"Having acted in the agriculture field for so many decades, we have learned that we could only count on the results at the end of each season," she says. "We estimate a good one, due to our products that proved performance. We are proud to confirm that KWS corn hybrids demonstrated one more time the stand-out genetics they carry within, and brought great crops to the farmers that chose them. So, a high tech product adapted to target needs always wins," she concludes."

Leslie Breer, Signal Iduna: 2015 is the year of comeback for the health insurance industry

The Romanian health insurance industry has been stagnant during the past years, however, "2015 is the year of comeback" and growth, Leslie Breer, president, Signal Iduna tells The Diplomat - Bucharest. "Romania′s health insurance market is in continuous development and growth, still a young market, but one with potential and opportunities. Compared with previous years, the health insurance market has recorded a significant growth," says Breer.

Signal Iduna grew twicefold in 2014, as compared to the previous year, and a further growth of 20-30 per cent is expected for 2015. "This year will also see continuous growth although not quite as much as in 2014. We expect for 2015 a 20-30 per cent increase, while the first half has already seen a similar surge."

Even if growing to a market leader with 41.6 per cent share, Signal Iduna posted losses of about 2.4 million Euro last year, but as it grows its clientele pool, it closes to the break-even point. The company ended 2014 with 5.97 million Euro gross written premiums.
"The positive trend that Romania′s economy has at this moment will certainly also impact in a positive way the insurance market. The Romanian insurance market as a whole is still underdeveloped in comparison to many other markets, which allows for substantial growth potential. However it also remains a problematic market due to quite extreme price sensitivity and lack of education," says Breer.

And the changes to the Fiscal code increase the attractiveness of the market. "Changes brought in by the fiscal code will increase the attractiveness of health insurance for companies, due to increased deductibility of premiums from 250 Euro per employee per year up to 400 Euro per employee per year."
At the same time, the new rules introduced by the Solvency II capital adequacy regime bring in critical changes to the industry: the market will be cleaner, the corporate governance imposes new rules to the management and employees of insurance companies, and also the customer selection process will get tougher.

Solvency II, which will be enforced in Romania starting with 2016, has seen companies beefing up their share capital during 2015. Signal Iduna has increased its share capital by 1.5 million Euro this March, and another 2.7 million will follow by end-September, says Breer.
Most of Signal Iduna′s local business (97.2 per cent as of 2014 figures) is focused on health insurance, which brought the company a market share of 41.6 per cent after the 2014 growth of almost 200 per cent against the previous year. One of its top contracts in 2014 has been signed with OMV Petrom.

Contributing editor: Bogdan Tudorache