RSM Romania_Business Brief_12-16.09.2016

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THE BUSINESS WEEK IN ROMANIA
12 – 16 September 2016

MACRO
• State reorganises C.N.A.D.N.R.
Because of late implementation of E.U.-funded
projects, the state has organised C.N.A.D.N.R. into
two new companies: the National Roads Investment
Company (C.N.I.R.) and the National Roads
Infrastructure Administration (C.N.A.I.D.R.). C.N.I.R. will
come into operation in 2017 and will be funded using
fifteen per cent of the monthly road tax and bridge tolls
revenues. The company may also be privatized, with
the state keeping a majority stake.
• Romania’s foreign debt bloats by a further 1.8 billion
Euros in July
Romania’s foreign debt ballooned by 1.79 billion Euros to
90.05 billion Euros in July as a result of increased shortterm
borrowing. The figure fell by two billion in May, but
bounced back in June. As of 31 July 2016, 69.38 billion
Euros, 77% of the total, was accounted for by longterm
borrowing, 31.6 billion of which was public debt,
which has remained steady since the end of 2015. The
unguaranteed public debt was 36.55 billion Euros, a fall
of almost 1.2 billion, while monetary authority debt, i.e.
national bank debt to the I.M.F., decreased to 1.23 billion.
At the end of May the total foreign debt reached its
lowest level since August 2010, at 87.8 billion Euros.
• A.S.F. sets ceiling on R.C.A. tariffs
The A.S.F. has set a ceiling of R.C.A. tariffs, after an
angry demonstration by hauliers and transporters. The
A.S.F. estimates a level of 7,500 lei per annum for lorries
of more than sixteen tonnes and sets a maximum 25%
margin on the calculated value based on the frequency
of damages. Tariffs will also be altered through the
bonus-malus system. Transporters were not long
in protesting, although the Government passed the
ordinance that includes freezing R.C.A. premiums for
six months, according to which insurance companies
will pay daily penalties if they do not pay motor vehicle
repairs on time. Likewise, a one-month R.C.A. will be
introduced, and the policy can be suspended if the
motor vehicle is out of service.
A.N.R.E. calendar for installation of smart meters
A.N.R.E. will lay down a national calendar for the
phased introduction of smart electricity meters, after
evaluating pilot projects. At the beginning of 2016, an
A.N.R.E. order stipulated elimination of the proposed
target of 2020 for implementation with around eighty
per cent of end users, inasmuch as a cost/benefit
evaluation had not been made. Likewise, the period
in which the evaluation is to be made will no longer be
2016-20, but 2017-20. A.N.R.E. explains that following
the pilot projects, results were not uniform and it has to
carry out an analysis for all distribution operators via a
third-party consultant/audit.
• 19% increase in foreign direct investment in Romania
Foreign direct investment in Romania increased by
19% in the first seven months to 2.34 billion Euros,
an increase of 18.6% on the same period last year.
Last year there was an increase of 25% to more than
three billion Euros, from 2.42 billion in 2014. Foreign
direct investments are regarded as the most beneficial
investments made by foreign companies in an economy
since they are usually long-term and have a positive
impact on the economy and wages.
• State pays for promotion
The Government is forking out three billion lei for
Romanian entrepreneurs. The Ministry of the Economy
is debating whether to stump up for their petrol and
hotel expenses so that they can come to Bucharest for
a small- and medium-sized businesses fair aimed at
promoting business. The eighth annual T.I.M.M. will bring
together 450 small businesses. The state will cough
up 1.62 billion lei for the entrepreneurs’ expenses and a
further 1.38 billion to organise the fair, which will be held
at the end of October and beginning of November.
• Doom and gloom for Romania in the Fraser economic
freedom rankings
Romania has plummeted five places in the Fraser
economic freedom rankings and now languishes in 22nd
place, due to deficiencies relating to private property
and the sacrosanctity thereof, the labour market, and
the country’s impenetrable thickets of bureaucratic red
tape. Lithuania, Estonia, Armenia, Finland, Denmark and
Malta all have a lead on Romania. According to a report
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• taking into account data from 2014, Romania’s rulers
continue to treat the inviolability of private property
as a matter of piffling importance at best. The country
also lost ground when it came to its already dismal
record on bureaucracy, pen-pushing and bumbledom,
on the one hand, and corruption, subornation, political
malversation and knavery, pecuniary malfeasance,
bribery, graft, jobbery, nobbling, palm-greasing, payola,
backhanders, bungs, baksheesh, and general, all-round
sleaze, on the other hand. According to the Fraser
Institute, states that have dire shortcomings with
regard to their legal systems and protection of the right
to private property cannot possibly thrive, even if they
show progress under other headings.
• Romania now E.U. leader on labour costs
Romania is the E.U. leader when it comes to higher
labour costs in the second quarter. Costs rose by
twelve per cent, way above the 1.4% increase recorded
in the rest of the Union, while the figure fell by one per
cent in the Euro Zone. The increase came against the
backdrop of an 18.9% increase in non-business costs
and a 10% increase in business costs, both of which
were way above the European average. An hour of
Romanian labour increased by 14.8% in the construction
sector, by 11.6% in the services sector, and by 6.9% in
the industrial sector.
• Trade deficit 30% bigger
In the first seven months of the year, the trade deficit
burgeoned by 30% compared with the same period
in 2015, increasing by 1.17 billion Euros to 5.11 billion
Euros. Imports soared by 5.8% to 38.1 billion Euros,
and exports by 2.9% to 32.99 billion Euros. According
to Mihai Ionescu, president of the National Exporters
and Importers Association, the deficit comes against
a backdrop of excessive consumption, which forces an
increase in imports, and the fact that the Programme to
Promote Exports has been blocked for three months.
The Executive is working on it, however. They intend to
issue a Government Decision to unblock it.
Romania set to become one of the E.U.’s top ten
economies, maybe
In the next twenty years, Romania might just become
one of the E.U.’s top ten economies, increasing its
G.D.P. fourfold, if the country focuses on a modern
infrastructure and on demographics and human capital,
according to representatives of the Foreign Investors
Council. A qualitative leap would be required if the
country were to achieve four per cent annual growth.
The present estimated growth is 3.3%, rising to 4.5% at
the end of the period. On the other hand, the investors
argue that the current rate of growth, although
encouraging, is not sustainable in the long term in the
absence of a strategic approach. To this end, the F.I.C.
intends to increase awareness of Romania’s potential
via a campaign entitled TO BE CONTINUED.
Sources: News.ro, Profit.ro, Hotnews, Startupcafe,
Agerpres, Bursa, Incont
BUSINESS
Airbus to produce helicopters at Ghimbav
None other than François Hollande, the President of the
French Republic himself, personally inaugurated the new
helicopter factory at Ghimbav where the multipurpose
H215 helicopter is to be produced. The investment is
worth 52 million Euros, plus another five in state aid.
Cheap Russian helicopters have driven Airbus to build
a plant in Romania, given the lower costs here. Airbus
also hopes to sell ten of its new helicopters to Romania,
although Romania would prefer to modernise the old
ones it has already got.
• evoMAG inaugurates new showroom and doubles its
warehouse capacity
evoMAG has inaugurated a new showroom, doubling its
warehouse capacity, as a result of an increase in sales
and also in order to get ready for Black Friday and the
holidays. The investment is worth a hundred thousand
Euros. The new showroom, at nos. 257-259 Splaiul
Unirii, has more products on show than elsewhere, and
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• its location on a busy thoroughfare is sure to bring in
plenty of punters. The move is intended to sustain the
company’s more than twenty million Euro turnover in
2016, an increase of twenty per cent, which outstrips
the local electronics retail market’s annual rate
of growth.
• Polish retailer 4F coming to Romania
Polish sports clothing and accessories retailer is
opening its first shops in Romania, at three malls in
Bucharest. The first two opened at Promenada and
Park Lane on 16 September, further shops will be
opening in the Mega Mall on 23 September. Igor Klaja,
the C.E.O. and owner of O.T.C.F., which owns the 4F
and Outhorn brands, as well as the 4Faces multi-brand
shops, made the following declaration to the press:
“We have achieved constant growth through
improvement of our range and the introduction of new
items, and our entrance onto the Romanian market has
been an important step in our expansion.”
• First brand campaign in ELECTRICA’s history
Electrica has embarked upon the first ever brand
campaign in the company’s entire one-hundred-andtwenty-year
history. Electrica aims to rediscover the
rôle of energy and to talk about it as a true catalyst
of everyday life. McCann WorldGroup Romania and
United Media Services, together with Family Film and
film director Răzvan Mărculescu have contributed to
the development of the campaign, which includes
two television advertisements and numerous visuals.
The campaign will run on television, the Internet,
social networks, in the local and national press, and on
advertising billboards.
• Alro Slatina invests more than 100 million lei in research
and development
Aluminium producer Alro Slatina is acquiring research
and development equipment as part of an E.U.-
financed project worth more than 115 million lei, with
the aim of breaking into the automotive and
aeronautics field. In 2016, Alro will also invest in energy
efficiency and extending its portfolio of clients, by
increasing its production capacities in the processed
aluminium sector.
• Transelectrica’s top two debtors: CE Oltenia and
RCS&RDS
The Oltenia Energy Complex is Transelectrica’s biggest
debtor, with outstanding payments of 6.4 million lei
for energy transport services. RCS&RDS also owes a
whopping 3.8 million lei. In total, Transelectrica needs to
claw back receivables of 67.2 million lei. This figure can
be broken down into 50.1 million lei for the receivables
and 17.1 million lei for penalty payments.
• Ford repairs Romania’s roads
Ford Romania, the Association of Automobile Builders
and Government representatives sought solutions to
Romania’s deplorable roads at a round-table meeting at
the factory in Craiova. According to Ford internal studies,
improvement of road transport through construction
of ring roads in Balș and Slatina would reduce haulage
times by three hours, while improvement of the rail
network would produce time savings of fifteen hours.
• Bilbor Mineral Water to be flogged off
The assets of Bilbor Mineral Water, part of United
Romanian Breweries Bereprod (U.R.B.B.) went into
insolvency last year and has been put up for sale at a
price of five million Euros (before V.A.T.). Land, buildings,
equipment, stocks, brands, bottle design, product
licences, goodwill—the whole lot is up for sale, lock,
stock and barrel. Bilbor Mineral Water was launched in
2010 and the original investment was more than ten
million Euros.
• 2016 the best ever year in retailer Altex’s entire history
This year, Altex sales were the best in the company’s
history, better even than the peak years of 2008 and
2015. Romania’s offline retail market leader had total
revenues of 438 million Euros, an increase of 30.5%
compared with 2015. When viewed from the business
perspective, 2015 was similar to 2008, the best year
in the company’s history thitherto. Against a backdrop
of increased consumption, 2016 looks set to be even
better, thanks to lower V.A.T. and sales above the
market average in the first six months of the year.
Sources: Capital, Agerpres, Revistabiz.ro, thetrends.ro,
Digi24, Profit.ro, Hotnews, Bursa, News.ro
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