RSM Romania_Business Brief_22-26.08.2016

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MACRO • Budget policy sacrifices investments Seven months into the year, investment spending is only half what was planned. If investments had gone as planned, the deficit would be three per cent of G.D.P. The budget deficit of 0.2% of G.D.P. (1.7 billion lei) is the sole cause of the strangulation of spending on investments, due in large part to a collapse in receipts of E.U. funding. The 2016 budget forecasts non-returnable funds of thirteen billion lei, but so far only 1.3 billion lei has been received from the E.U., a tenth of the total. The government aims to spend 37.7 billion lei on investments this year, but has spent only 12.8 billion so far. Ministry of Finance borrows 75 million lei from the banks The Ministry of Public Finance has borrowed seventyfive million lei from the banks, in addition to the auction last Thursday, when it attracted 646.3 million lei from the issue of seven-and-a-half-year bonds at an average yield of 2.63% per annum. The sums will go to refinance public debt and the state budget deficit. • The National Bank’s reserves would have no value if they were kept in Romania Romania keeps its international reserve abroad because it would have “absolutely no value” if it were kept in Romania, explained Mugur Isărescu, the Governor of the National Bank at a press conference held in Alba Iulia. “Because very many people believe that there is something fishy going on if the National Bank keeps its gold in London. Well, gold is part of our international reserve. It is the international reserve. It is not the internal reserve. The whole international reserve of a country is kept abroad, and that is why it is called the international reserve. Dollars, thirty-two billion of them, thirty-seven billion in the equivalent of dollars—we do not keep them here in Romania. If we kept them in Romania, they would have absolutely no value. They would not ensure stability. We keep them in accounts abroad. That is the way to keep them. It seems counter-intuitive, but if we kept the foreign currency reserve in Romania, in the first place we would be lending for free, without interest, to the countries who issue the currencies in question, and in the second place, we would not ensure convertibility,” declared Mugur Isărescu. • Romania wants guarantee fund for investments in Chișinău Romania is prepared to create a guarantee fund for investments in Chișinău, according to Dacian Cioloș, speaking after a meeting with his Moldovan counterpart Pavel Filip. Cioloș said that it was important to stimulate Romanian investments in the Republic of Moldova and that a major Romanian bank is willing to do so. Sources: Agerpres, Economica.net, Profit.ro, News.ro, Bursa, Mediafax, Ziarul Financiar BUSINESS Nine-million-Euro injection of capital in insurance Two insurance companies, AXA and Gothaer, received a nine-million-Euro injection of capital last month. AXA investors stumped up the lion’s share of the cash: 5.3 million Euros. AXA was recently bought by the Vienna Insurance Group. AXA is now worth more than 95 million lei (twenty million Euros). Gothaer’s German shareholders came up with 3.3 million Euros in capital in July, making the company worth more than 53 million lei (twelve million Euros). Gothaer has a turnover of around eighty-two million lei in Romania and around eighty thousand clients. • C.E.C. continues financing agriculture in partnership with A.P.I.A. C.E.C. Bank has announced it will be continuing its partnership with the Agricultural Payments and Intervention Agency (A.P.I.A.) on the following support schemes: Single Payment by Surface Area, Redistribution Payment, Greening Payment, and Compensatory Measures for Rural Development Applicable to Agricultural Land. Beneficiaries will be able to access up to ninety per cent of the value of the sum calculated according to the certificate issued by A.P.I.A., if this is less than twenty per cent of turnover or revenues. The bank states that interest will be 3.51 per cent per annum. Commission is 0.95 per cent of the value of the loan. THE POWER OF BEING UNDERSTOOD AUDIT | TAX | CONSULTING
BUSINESS • Investments of thirty million Euros Gold Plast, the producer of top-quality disposable plates, has made an investment of thirty million Euros in its Topoloveni factory, which was established in 2006, with a workforce of thirty-five and now employs six hundred and twenty-five. The Topoloveni factory is the Gold Plast Group’s centre of excellence, where it produces all the equipment it needs in order to manufacture three thousand types of item, with an output of eight hundred million units per annum, retailed in thirty-nine countries. • Poșta Română struggling but has potential Poșta Română, owned by the Ministry of Communications, has the capacity to become Romania’s largest postal and courier services provider, thanks to its network and the fact that it can reach places private companies cannot. However, the company has a difficult financial situation, with total debts of 645.6 million lei at the end of 2015. Poșta Română has taken out a three-year loan of sixty million lei from state bank Eximbank to finance its working capital, after recording losses of thirty-three million lei last year, against a backdrop of a four per cent decrease in business. In the first half of this year Poșta Română recorded a net profit of 15.8 million lei, 2.5% up on the same period of 2015. Romania’s courier market is worth 350 million Euros and the market leader is Fan Courier. • B.C.R. has sold three tonnes of gold in the last eight years The Romanian Commercial Bank (B.C.R.) has sold three tonnes of gold in the eight years that have elapsed since gold began to be distributed through the banks. The quantity sold is worth 504 million lei (113 million Euros) at the price of 168.1 lei per gram, the latest price quoted by the National Bank. Gold sales increased in 2016 against the backdrop of risky financial markets and small or partly negative yields on state bonds on developed European markets. Sixty per cent of gold purchasers are men aged between thirty and fifty. The B.C.R.’s most popular gold products are coins and tengram ingots. A ten-gram ingot will set you back 1,934 lei, while a kilogram will cost you 185,512 lei. • Raiffeisen Bank takes Romania to court Because of the commissioning payments law, Raiffeisen Bank is to take legal action against Romania at the International Centre for Settlement of Investment Disputes, the World Bank’s court. The Ministry of Public Finance has confirmed that it has received a letter of notification from Raiffeisen Bank International. The Ministry will consult with the initiator of the commissioning payments law, deputy Daniel Zamfir, and lawyer Gheorghe Piperea, as well as with the National Bank of Romania. The ministry will also study the answer that the Constitutional Court is due to provide with regard to the bank’s citing of the unconstitutionality of the law. • Commissioning payments law has not led to a collapse in the banking industry Three months after the commissioning payments law came into effect, less than two per cent of borrowers have expressed an intention to give up their homes to pay off their mortgages. Some banks have tightened lending requirements and substantially increased both interest and down payments. The result has been that some customers have hurried to take buy homes as quickly as possible, while others have decided to wait, wagering that prices will fall as a side effect of the new law. • Diverta opens new shop in Promenada Mall Diverta has opened a new shop in the Promenada Mall. The shop covers one hundred and seventy metres and by November will expand to incorporate an adjacent onehundred-square-metre space. Founded in 1999, Diverta, which sells books, games, gadgets, and stationary, has six shops in Bucharest and twenty-five shops around Romania. The company distributes thirty thousand book titles. Sources: Capital, Curierul Național, Profit.ro, Agerpress, Bursa, Ziarul Financiar, Adevărul • THE POWER OF BEING UNDERSTOOD AUDIT | TAX | CONSULTING
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RSM Romania_Business Brief_22-26.08.2016

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