RSM Romania_Business Brief_04-08.04.2016

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THE BUSINESS WEEK IN ROMANIA
4-8 April 2016

MACRO:
• Warnings from the Governor of the National Bank
As part of the Financial Stability Report, Governor
Mugur Isărescu has made four warnings on serious
threats that might easily materialise. One of the most
serious warnings concerns a possible recession (a
possibility that surpasses fifty per cent, according to
the Report) in the event that the deficit is exceeded as
a result of public debt reaching the danger level. “Given
the probable dynamic of events—the separation of
the European Union into two conceptually different
areas—decisions to join the common currency will be
required earlier than has previously been estimated,”
says the Report, published by the National Bank on
Thursday. The second warning: Inasmuch as 2016 is
an electoral year, the probability of initiatives similar
to the commissioning payments credit conversion
plans appearing is very high. The third: The budget
deficit will approach four per cent of GDP in 2017, which
will cause Romania to re-enter the excessive deficit
procedure. The risk at the domestic level of a return
to pro-cyclic fiscal policies is growing, having already
partly materialised in the adoption of a budget for 2016
with a deficit of three per cent of GDP, more than twice
that achieved in 2015. The fourth: Stimulate drivers of
growth other than consumption!
• Public wage increases from dividends distributed by
state owned companies
Public wage increases will be covered in large part
from dividends to be paid into the budget from state
companies. To this end, the government has taken into
account the increase in the obligatory quota of money
that state companies have to pay to shareholders,
from the current level of fifty per cent to seventy per
cent of profits. Public wages are due to increase from 1
August, payable in September, with large increases, of
up to twenty per cent, but only for employees poorly
paid at present, such as social workers, who account
for around half of the public sector workers, with rises
of just one per cent in other cases. The financial impact
has been calculated at five hundred million lei for this
year and at 2.3 billion lei gross (1.5 billion lei net) for
next year.
• Stable rating for Romania
Standard and Poor’s (S & P) has confirmed Romania’s
long- and short-term foreign and local currency
debt ratings as “BBB minus/A-3), with the outlook
being stable, according to a press release quoted
by Agerpress. “BBB minus” is the first rating in the
investment grade category. Romania enjoys a “Baa3”
rating from Moody’s and a “BBB minus” rating from
Fitch. Standard and Poor’s state that maintenance
of the ratings granted to Romania is due to the
moderate level of foreign debt, against the background
of prospects for stable economic growth. On the
other hand, S & P believes that Romania’s ratings
are constrained by the low quality of governance,
despite recent efforts to reduce corruption, and also
by the low level of per capita GDP reported by states
in this category (estimated at 9,300 dollars in 2016).
As regards the stable outlook that goes hand in hand
with the rating accorded to Romania, S & P points
out that it reflects a balance between the likelihood
of an increased deficit, on the one hand, and the low
level of government and foreign debt, on the other.
“We might increase Romania’s ratings if the process
of fiscal consolidation continues, restructuring of
state companies is successfully implemented, and
net government debt kept firmly on a downward
trajectory,” say Standard and Poor’s.
• Re-examination of the supra-government lawOn
Friday, President Klaus Iohannis sent to Parliament
a request for re-examination of the Law on Macroprudential
Supervision of the National Financial
System. The Head of State argued in his request:
“Some of the provisions of the Law on Macroprudential
Supervision of the National Financial System
are lacking in predictability and clarity, for which reason
their re-analysis by Parliament is necessary.” The law
sent for re-examination stipulates that the Governor of
the National Bank, Mugur Isărescu, will become head of
a new institution, the National Committee for Macroprudential
Supervision, which can recommend that
the Government take measures to maintain financial
stability, and the Government “must adopt measures
accordingly.” In his request, Klaus Iohannis stresses:
“In both the Romanian and the European system,
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MACRO:
• recommendation does not engender an obligation to
act accordingly.” The proposed law was put forward
last year by the Minister of Finance and accepted by the
Ponta Government, which submitted it for debate
in Parliament.
Sources: Hotnews.ro, profit.ro
BUSINESS
Banca Transilvania knocks the Proprietatea Fund
from third place
Banca Transilvania has become the third most valuable
company on the Bucharest bourse, toppling the
Proprietatea Fund from that position. The bank’s rise
occurs in the context of a dramatic 45% rise in the
value of its shares over the past year, whereas the
Proprietatea Fund’s capital and shares have reported
a decrease. Only twenty million lei separate Banca
Transilvania, in third place by assets in the banking
system, from the Proprietatea Fund on the bourse.
The capitalisation of Banca Transilvania, calculated as
the product of share price and total number of shares,
yesterday reached the value of 8.35 billion lei. By way
of comparison, the Fund’s capitalisation was 8.33 billion
lei, equivalent to fourth place in the table of the most
valuable companies on the bourse. Fifth place is held
by BRD, with a capitalisation of around seven billion lei.
BRD has greater assets than BT, at around two billion
lei, but on the bourse investors regard BT as the more
valuable company. The rise of BT to a place among the
most valuable companies listed on the bourse is all the
more notable in that the bank is one of the few private
issuers, having been started as a private business
in 1994.
• Euronext will launch a futures contract for wheat in the
Black Sea basin
Euronext will create a futures contract for wheat in the
Black Sea region. The futures operator thereby hopes
to meet investors’ demand for one of the world’s most
important producing and exporting regions, reports
News.ro. “Following evaluation of the demand for a
suitable mechanism to stabilise prices in the producing
region in question, we are seriously analysing product
design,” declared the director of the goods transactions
division of Euronext, Olivier Raevel, attending a cereals
conference in Geneva. He refused to provide details
connected with the futures contract for wheat from
the Black Sea region, which would combine with the
contract for wheat for bread production in Western
Europe. Euronext operates bourses in France, Holland,
Belgium and Portugal.
• Programme to replace old water networks
On Friday in the Palace Concert Hall, Apa Nova met
1,500 representatives of owners’ associations from
Bucharest to discuss issues including the prices
practised by the water supplier, drains services,
shortcomings in water supply, and a new approach
to communications with subscribers. The new Apa
Nova management put forward a pilot programme to
replace old water supply pipes in apartment blocks.
“We want to work with Veolia and in your apartments.
For owners’ associations we are thinking about a
subscription that would allow us to keep a permanent
check on the condition of the network. By August at
the latest, on the company’s new social responsibility
platform, we will choose three or four blocks and with
a small co-financing from owners’ associations of ten
to fifteen per cent we will replace the interior pipes,
because they want to see what quality means after
you replace the thirty-, forty- or fifty-year-old pipes.”
declared Mădălin Mihailovici, the Director General of Apa
Nova Bucharest, on Friday. Veolia Environment is the
largest water distributor in the world to be listed on the
stock market. Since 2000, Veolia has owned the Apa
Nova distribution and drains network, via the French
Veolia Water Group, jointly with the Municipality
of Bucharest.
• Philippos Karamanolis takes over the helm of Bancpost
The position of Executive President of Bancpost, the
local subsidiary of Eurobank, will be taken over by
Philippos Karamanolis on 16 May, replacing George
Georgakopoulos, who has decided to move to pastures
new outside the group and outside Romania. Philippos
Karamanolis will take up the position subject to
receiving authorisation from the Romanian National
Bank, according to a company press release.
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BUSINESS
• “Philippos Karamanolis has extensive experience in the
financial-banking field and a profound knowledge of the
international presence of the Eurobank Group, which
lends added value to our activities in Romania. We
wish him great success in fulfilling his new duties within
Bancpost” said Stavros Ioannou, the Deputy CEO of
Eurobank Group. Philippos Karamanolis was executive
vice-president of Bancpost from 2005 to 2008, going
on to be Chairman of the Executive Committee of
Eurobank Serbia. Bancpost is a top-ten bank, which
returned to making a profit in 2015 and is now in a much
more stable position than during the financial crisis.
• Romanian companies don’t get any help from the
Romanian Government
According to the latest consolidated data for 2014,
Romanian businesses in Romania accounted for 47% of
the total, while the percentage of foreign businesses
rose to 49%. The remaining 4% was accounted for by
state companies. Of the total turnover of 1,088 billion lei
for 461,000 active companies, 509 billion lei was earned
by private Romanian companies (423,000 companies),
with 2.4 million employees, and 536 billion lei was
earned by foreign companies (38,000 companies), with
1,18 million employees. Although the foreign companies
had a higher turnover, their net reported earnings
(profits versus losses) was minus two billion lei. On the
other hand, Romanian companies reported a positive
figure, at 14 billion lei (profit of 33 billion lei, losses of 19
billion lei). Romanian entrepreneurs feel frustrated with
the situation, since the Government supports foreign
companies, giving them access to Victoria Palace and
every public administration, while at the same time
seemingly trying to place obstacles in the way of
Romanian companies. The state subsidises the creation
of jobs and payment of labour taxes and imposts for
foreign companies, although Romanian companies are
responsible for double the number of employees, filling
in mountains of paperwork, only for the bureaucratic
system to slam the door in their faces, telling them that
one or another document is missing. For this reason,
at the level of the country as a whole, multinationals
were able to pay an average net wage of 1,972 lei in
2014, while Romanian companies were able to pay just
1,034 lei. This means that Romanians prefer to work for
multinationals, with Romanian companies coming in
third place, and state companies in first place, where the
average net wage was 2,294 lei in 2014.
• Green light for the construction of a gas pipeline
under the Danube
Romania’s Transgaz and Bulgartransgaz are to
sign a contract with Austria’s Habau PPS Pipeline
Systems with a view to constructing a pipeline
under the Danube, according to Novinite. The signing
ceremony will take place on Wednesday afternoon
in Sofia, according to the Bulgarian Energy Ministry.
Bulgartransgaz and Transgaz are jointly implementing
a project whose purpose is to diversify gas supply
sources and routes. The two companies have received
8.9 million euros to finance the project, as part of the
European Energy Programme for Recovery. In February,
Habau won the tender to build the underwater
section of the gas pipeline. The pipeline will stretch
for approximately two kilometres and take 119 days
to build, at a cost of 4.57 million Euros before VAT,
according to capital.bg.
Sources: ZF.ro, Adevărul financiar, News.ro, mediafax.ro
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