Learning from the best
Norway's reputation as a clean and prosperous nation with media freedom and low level of graft could offer a few lessons for Romania
 Looking at western and new Europe, Romania and Norway are at opposite poles.
At one end is a country with the highest standard of living, the most independent press, the lowest country risk for investment and the smallest amount of corruption and, at the other, is Romania.
With 4.5 million people, Norway has benefited from oil wealth in the last thirty years and has set itself up as a strong diplomatic nation, cooperating between Palestinians and Israelis and, in Romania, strengthening its operations due to the country's recent NATO accession.
Since 1966, approximately 1,354 Romanians have moved to Norway, while between 40 and 50 Norwegians are in Romania. Although this may not be too numerous, an Institute of Scandinavian Languages and Literatures at the Babes-Bolyai University in Cluj has now built up such a reputation that 150 Romanians are studying the Norwegian language. Also an 'Ibsen Festival' is planned by the National Theatre in Iasi for April next year, to celebrate the naturalist playwright's centenary.
A career diplomat for 28 years, Norwegian Ambassador to Romania Leif Arne Ulland had wanted to come to a country that was joining NATO and was set to join the EU when he was appointed two years ago. Romania's NATO membership should be an asset for the international club, he argues: “I am convinced this will benefit European security and thus be valuable for Norway.” Due to this, his government will appoint a permanent military attache in Bucharest this August.
“We have an active military cooperation,” says Ulland. “Both our countries have large contributions to peace operations in Afghanistan, the Balkans and Iraq.”
Strategically, the Black Sea area is of great focal interest and Norway is interested in the democratic development and finding solutions to frozen conflicts in this area. The district also has considerable energy interests.
Romania's membership in the EU and the European Economic Area should strengthen cooperation and, although not an EU member, Norway participates in the internal market, is part of the Schengen and other cooperation areas. In Romania, Norway has set up around 30 different projects in justice, environment, health, agriculture and social development, with special priority dedicated to the most troublesome chapter in joining with the EU, justice and home affairs.
Norway has applied three times for membership in the EU and completed negotiations with the EU twice. But, in both 1972 and 1994, the Norwegian people rejected joining by a narrow margin.
“It is difficult to convince Norwegians to join the EU,” says Ulland. “We are a rich country and the people are generally satisfied with the existing situation. Many of those who are against membership point to the difficulties our fisheries and agriculture may face, loss of national sovereignty and the development of the EU in the direction of a rich men's club and united states of Europe. Those in favour point to the advantages for our economy in general, the need to be present where decisions affecting us are taken, the benefits of European integration and of belonging to the family of European democracies in its fullest sense.”
However he believes the EU issue will come up again in Norway in a few years time, but not before it is clear in which direction the EU goes with its controversial new proposals for the constitution.
In 2002 the Norwegian government decided to set up a national strategy and action plan to fight economic crime. “Corruption, economic crime and money laundering from illegal activities is a common challenge and a problem also for Norway,” says Ulland, who says best practices need to be shared.
At a recent seminar in Bucharest. Norwegian anti-corruption prosecutor and advisor Eva Joly said it would be hard for Romania to find the cash to prosecute the corrupt. “The resources are limited, but justice has a difficult job in every country,” she said. “Powerful people all over the world who are involved in a corruption case will want to stop the investigation, because corruption fights back. Anti-corruption asks for sacrifice and the journalists are paying a big price.”
The most problematic aspects in media freedom, the ambassador believes, are the accumulation of significant arrears by several large media companies and cases of physical attacks on journalists. The first may influence editorial independence and the second hamper the press in its investigative role to reveal abuses of power and financial crime.
In looking to make Romania a more sustainable economy, Ulland argues that the main challenge is the fight against poverty and economic deprivation. Romania needs a stronger middle class to underpin its progress and the protection of vulnerable groups such as pensioners, he argues.
Another important challenge is to improve public administration and public institutions, including the fight against corruption and reform of the justice system.
“A high level of trust in public and private institutions is an important aspect of economic and social progress in all countries,” says Ulland.
“Because of its history Romania faces greater obstacles than many other countries in this respect.” |
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Northern promise
After hunting high and low, buying into the local market has been the focus of Norwegian firms, who have preferred to pick up and build up dynamic local firms
 Foods, fish and engineering have been the main development areas for Norwegian investors, although smaller, entrepreneurial funds have sought to set up any industry which could turn a profit. Large Norwegian groups such as Aker Kvaerner and Orkla Foods have invested heavily and seem to be here for the long term. This has meant that, by the end of 2003, the total sum of Norwegian foreign direct investment was 190 million USD. However the figures for 2004 indicate a reduction in the total value of trade due to a decline in Romanian exports of ships and ship hulls to Norway. This fall, together with an increase in Norwegian exports, contributed to a reduction in the Romanian trade surplus with Norway to 58 million Euro in 2004.
In September 2003, Ambassador Leif Ulland created the advisory team NORTEAM Romania to promote bilateral business and trade and the knowledge and business perception of Norway. Now travel is on the increase between Norway and Romania. There are about 10,000 Norwegian tourists in Romania each year and four Norwegian airports have weekly flights to the Black Sea coast although Eirik Mathisen of the Norway Embassy says there are only relatively few Romanians travelling to Norway.
A TASTE FOR THE MARKET
The business plan of Orkla Foods concentrates on buying or establishing different brands peculiar to its countries of operation. So far it has made successful inroads into the condiments and processed food markets in Romania, where the firm's strategy is to purchase successful local businesses and use this as a base to expand.
In 2002 the Norwegian company first entered on the Romanian market after the acquisition of local firm Topway Foods. Last February Orkla Foods bought out the second largest Romanian company in pate and canned meat Ardealul SRL, based in Covasna.
Present in the jam and liver pate markets, Orkla's local portfolio includes Tomi ketchup, margarine Wiessana, condiment and edible oil brand 'Bunatati de la bunica' (Goodies from the Granny) and budget brand 'La minut' (One minute). Last year Orkla set a local record of fourteen product launches.
“We buy into a market,” says CEO Aliz Kosza. “We always buy the brand and the trade mark. And it is a must that the company in which we invest in is on the first three places on its market.” The company has three local production platforms in Craiova, Targoviste and Covasna, but the administrative centre is in Bucharest.
In the future the firm is preparing to develop a products segment dedicated to kids.
Maritime firm Scanrom Romania, part of Scandinavian Trading Partners, has busied itself in a number of operations across the fish and ship industry in Romania.
The firm started its activities as a broker for the sale of ships in 1993 and assisted in the establishment of the Aker Group in Romania, but then switched its operations and, in 1996, opened its first fishmongers. This was followed two years later by two association contracts with a fish farm. A year later Scanrom acquired the majority share package in the Sulina canning factory. “But this factory is now closed and we are about to sell it,” says general manager Stefan Silaghi.
In Craiova the firm has opened its own cold storage facility and is now looking to export to the European Union, although there is a problem, says Silaghi, in having to deal with the black market in illegally sold fish.
The firm has invested two million USD so far in Romania and rolled back the profits into further investment. “We want to improve our sales of fish in the west of Romania, and to increase our storage capacity up to 3,000 tonnes,” says Silaghi.
By 2003 Scanrom had a domestic market share of 90 per cent of fish product sales in the west side of the country (including 18 districts), but this has since declined.
A PLACE IN THE SUN
Moving from seeing local customers buying into its expertise in building materials to slapping on some lotion and lazing under a sun bed has been the journey so far for Bergen-funded local firm EBC.
Investors from the Norwegian city set up EBC in 2002 with an initial outlay of 50,000 Euro in the import and export of construction materials and technical and commercial consulting, but has since opened its first beauty centre.
“Romania is a long term investment,” says Laurentiu Trifu, an associate of the company. “We are looking here for business opportunities all the time.”
The first European Beauty Center opened in December 2003 with a 150,000 Euro investment and 12 solariums plus manicure, pedicure and the full whack to help get Romanians a better body and haircut.
EBC has also created The Romanian-Norwegian Business Consulting Center for Norwegian business people looking to invest in Romania and, true to inconsistency, Trifu says his firm will next try investing in the agro-tourism and real estate fields.
GOING UNDERGROUND
Engineering and construction giant Aker Kvaerner bought out electro-components producer and supplier IMGB in 1998 for ten million USD.
Since then the firm, which is one of the major suppliers to the Bucharest Metro, has invested 56.7 million USD and last year made its first profit, of 600,000 USD on a turnover of around 34 million USD.
Next year will see investments of almost one million USD in improving the working environment in its south Bucharest factory, says Florin Antonescu, General Manager at Kvaerner IMGB.
This will be in improving the sewerage and smoke extraction installations in the factory. The firm could also be looking into buying two Integrated Prevention Pollution Control (IPPC) stoves, which could save 30 per cent on gas consumption. At present IMGB has 700 employers.
SHIPPING AROUND
 One of Romania's youngest shipyards, Tulcea, was bought out in 2000 by Norwegian firm Aker Brattvaag, part of the Aker Yards group of shipyards. At present, the client list includes 13 port-army ships will be delivered to Norway.
For 2004 the turnover of the company was 70 million USD, but there was a loss. So far the firm has invested around 15 million Euro and is in the process of investing a further five million Euro in technology, says general manager Dumitru Ivanov.
Crewing firm Barklav Romania, established in 2000 in a joint venture between the Torvald Klaveness Group and Barber International Group, now has a foothold on the market in recruiting, assessing and deploying seafarers on board vessels and on shipyards.
The professionalism and quality of Romanian sailors and the attractive pay levels were behind the firm's reasons for entering the market, according to Laurentiu Lazar, the company's general manager and an Honorary Consul of Norway in Romania. So far the firm has hired 425 Romanian sailors, most of them destined for Norwegian ships. Barklav Romania now has a five per cent of the domestic market share and a turnover of 22.3 billion lei (609,000 Euro). For 2005, Lazar says the firm plans to develop training “in-house” and at specialist institutions for its clients.
SOFT TARGETS
Funded by Norwegian capital Sibiu-based software firm Mobile Media Capital now has partnership deals with Compaq, Erickson, Intel and Siemens and an annual one million USD turnover. In 1999 the firm started up with a 500,000 USD investment and has needed to reinvest its profits to keep up with the demands of the rapidly developing software market. “We are hoping for a ten per cent increase this year in our activities, which will include hiring more personnel,” says general manager Sorin Rotariu.
International land mapping and surveying firm BlomInfo founded its Romanian office Blom ASA in 2002 in a 700,000 Euro investment, and now has clients including Conpet, Transelectrica and the councils of Constanta and Targoviste in district waste. Last year the firm had a turnover of 1.4 million Euro and a 15 per cent profit and is now looking to double its number of employees to 300. “We will invest further in technology and know-how and in the extension of the local market and our production capacity,” says manager Dragos Neagu. Blom ASA Norway has also bough another company in Romania in the land mapping services, Geonet. |
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One step ahead
The course of true EU integration never did run smooth. But Poland has managed to come out of the process with benefits and experience that Romania may need
 European Union's largest new country Poland has been several years ahead of Romania in its accession to both NATO and the European Union.
This means the agriculturally rich country which, like Romania, has had to shift a gargantuan state infrastructure into the private sector, should offer Romania the best advice on how to move into the new Europe.
“After the relatively short EU experience that Poland has had, I can tell you that Romania could learn a lot,” says Polish Ambassador to Romania Jacek Paliszewsky.
Agriculture, at present, is the most troubling business sector for Romania.
“We have more or less similar structures to Romania. Poland, though, has received more privileges from the EU because roughly 70 per cent of our agriculture was in private hands and we were better prepared for membership because our irrigation systems were already functioning,” adds Paliszewsky.
“Now, when I travel through Romania, I see farms being gradually ruined and much uncultivated land. This can be explained by the fact that the re-privatisation process produced numerous individual farmers who are not able to cope.”
Despite fears that Poland's own products, particularly in farming, may not be able to compete abroad, Paliszewsky says his country of origin's goods now challenge the west and, although the Polish Zloty is at a record high, the export of such products has increased by 40 per cent since Poland signed up to the EU.
There has been criticism that Romania has not received as large an agricultural subsidy package as Poland and minister of integration Ene Dinga told The Diplomat that any further negotations in this area would not take place.
“It would be a difficult situation regarding Romania's renegotiating the system of subsidies 18 months prior to the accession,” says Paliszewsky. “The case of Poland indicates that it may happen, but on the other hand [this] alarmed the European Union that such a situation should be rather avoided in the future.”
Massive unemployment is Poland's biggest headache as it ranks among the highest in Europe, partly due to shock-therapy privatisations that have left many still living off welfare.
Romania has so far avoided such a large increase in jobless, but further privatisations due over the next two years could have a poor effect on employment.
“I think that the labour market in Romania is eased to a substantial degree by the emigration of hundreds of Romanians working abroad,” adds Paliszewsky.
This could increase as a major debate in the EU is on the controversial EU Services directive, which allows the free movement of services (except finance, telecoms and transport) between member states.
A key part of the Lisbon Agenda, which aims to liberalise the EU so it can become a single, free market state able to compete with Asian tigers and America, this directive subjects the service providers to the laws (for good or bad) of their home country.
This could allow dot.com firms or plumbers, from Poland or Romania to travel to Germany or France and potentially undercut the wages of the German or French nationals. The market in services, contrary to the structures of post communist countries, provide more than 30 per cent of the GMP (Good Manufacturing Practice) in Poland.
“This opens a big chance to the newly received EU members to expand their operations to the old members,” says Paliszewsky.
However France, one of the countries that faces big social challenges on their internal labour market, is a major critic of the proposals.
The European Council reached a compromise which hopes to limit the services that can qualify for the directive to those where there is a lack in western Europe.
Despite some deficiencies, Poland nevertheless managed to join at its appointed time. “The EU machinery is very precisely designed, the functioning of different institutions relates to the numerous legal frame works and regulations. In the case of Poland there were certain issues, which were agreed within our accession package, and that sometimes were not completed on time,” says Paliszewsky.
One example relates to regulations in regard to free transport. The different tarrifs and insurance obligations were not concluded on time. This caused anger from transport companies and problems at the Polish and German borders, particularly in regard to transport between Russia and Germany. Poland has also been tardy in implementing the Europe-wide emergency phone number '112' and may expect a fine.
Poland will also join Romania in sharing a long EU border with the rest of the world and control mechanisms need to be put into place. Paliszewsky says this needs special attention, because the next wave of immigration will be an exodus from central Asia and the far east.
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Pole position
Poland has its eye on Romania's affordable family cars, but the Balkan country needs to improve its agricultural products to bridge the trade gap
 Polish investors are bringing their businesses south in construction, food and manufacturing, but Romania has yet to take advantage of market opportunities with its northern European partner.
Bilateral trade between Romania and Poland in 2004 has exceeded one billion USD, which is a record volume, even taking into consideration the period before 1989, but the trade is firmly in Poland's favour. Industrial, chemical and food products are the most comonly traded goods.
“The Polish economy is currently more dynamic,” says Tomasz Suprowicz, First Counsellor of the Economic and Commercial Office at the Polish Embassy, “Our advantage is that we started reforms five to eight years earlier than Romania.”
One other reason for this trade gap, according to the counsellor, is the low level of Romanian economic missions to Poland.
The effect of aggresive privatisation in Poland compared to the gradual and incomplete process in Romania is demonstrated by the number of unemployed: three million (18-20 per cent) in Poland, while in Romania the number is about 500,000 people (six to eight per cent).
Although this arguably places Poland among the most troubled of the EU nations that joined last year, it could be claimed that such a sacrifice worth making for long-term economic sustainability, which Romania is yet to secure.
“This could mean that in Poland the work has been done more effectively, and also our technological capabilities are more modern,” says the economic counsellor.
Now he claims the two economies are less competitive and more compatible.
“The Polish are interested in Romanian agricultural products, like sunflowers and edible oil, but there are still some problems. Vegetables and fruits lack quality and are found in low quantities,” he adds.
Renault-Dacia's family car, the Logan, has attracted great interest, argues Suprowicz, “and not long ago there was a very strong cooperation with the Daewoo factories [in Romania] for machine parts.”
Recently Polish investors have also chosen to set up firms in constructions materials, such as Selena Romania and Koelner, while the largest investors are canning firm Can Pack and food and industry firm Maspex La Festa.
“Romania has not really made any efforts in presenting its own market as interesting to the Polish, there has been no programme or promotional activity for presenting Romania,” says the economic counsellor.
Nevertheless he admits this year has started promisingly. At least a few large Polish large head-hunting firms have opened branches in Romania. Another newcomer is milk firm Bacoma, who have two distribution centers in Bucharest and Sibiu with an ambition to bring new diary products for youngsters and children.
Maspex La Festa has so far invested around 20 million Euro in Romania and last year saw a 40 per cent growth in turnover. This year the firm plans to invest about four million Euro in its Valenii de Munte plant. “We are planning a larger development in the instant food products and soft drinks, and also to increase exports,” says Krzysztof Grabowski , president of La Festa.
Meanwhile beverage canning firm Can Pack will open a greenfield factory in Bucharest this June with an annual capacity of 650 million cans. The Bucharest-based factory plans to sell 30 percent of its production on the local market and export the rest. Starting three years ago in Romania, the firm has made a total investment of 40 million Euro, which includes a food canning facility in Tecuci.
“The most important clients of Can Pack in Romania are: SAB/Miller (Ursus), Brau Union, Tuborg and, most recently, Interbrew,” Gabriela Cruceanu, president of the Romanian company told The Diplomat. Can Pack also plans to set up a pioneering recycling centre locally and has two other factories in Poland and one in Ukraine.
Foam, sealant and adhesive supplier Selena has seen an increase in turnover and development over three years, with 50 per cent growth last year, Dorin Spataru, the company general manager for Romania told The Diplomat, which is faster than the construction market as a whole.
Selena Romania was the first branch created outside of Polish borders in 2000 and last year the turnover was approximately 2.8 million Euro with around a five per cent profit before taxes. In 2005 Spataru estimates a 4.2 million Euro turnover as the firm increases distribution and consolidates its position in the windows installation market.
On the differences between Romania and other east European markets in his field, Spataru says: “The suppliers haven't invest much in educating customers about the products; the laws and legal requirements have a long way to go to harmonise with European rules; the state authorities are overloaded and can't realise a systematic control of the construction materials market in order to stop the development of fake products.”
On 8 to 11 November, the National Polish Exhibition will take place at Sala Palatului, with around 70 Poland-based firms.
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