October 2004
The Romanian businessmen also expect the inflow of capital from abroad to step up, considering Romania was endorsed by the European Union particularly concerning the economy's development. On the other hand, Romania's membership to the EU set for 2007 alarms Romanian businessmen, as many of them fear the entrance of big-brand European companies on the markets they operate.
''The European Union's acknowledgement of Romania as a functioning market economy should signify the strengthening of the administrative discipline by the state, the observance of the laws, the protection of domestic producers since foreign investors will enter the market very easy because the Romanian manufacturers are not prepared for a tough competition. A functioning market economy gives the signal that money can be invested in this market, said Aurel Kober owner of the largest Romanian manufacturer of paint and varnishes which posts a turnover of around 40 million euros a year.
''The European Commission's recognition of Romania as a functioning market economy will improve Romania's image. It is true progress has been made over the past year, but there is still a lot be done,'' President of Continental hotel chain Radu Enache said. ''It is a very good signal, designed to clear up concern and to point to the fact that things begin to get back to normal. In a general economic context, economic merits should be recognised,'' one of the Romania's largest farm land owners Adrian Porumboiu says.
''It is a signal for foreign investors in the first place, and for Romanians' businesses in general. It is a signal ahead of Romania's joining the European Union and an encouragement by the European Community. This is our last stage and if we manage not to make any wrong step we'll reach there where we belong,'' chairman and main shareholder in Cris-Tim meat producer Radu Timis says.
The functioning market economy tag will attract big foreign investors and multinational companies, but we should prove we understand the meaning of this status, Chairman of the bank BRD - Groupe Societe Generale Bogdan Baltazar told Rompres on Wednesday. The entrance of multinational companies on the Romanian market will contribute to the consolidation of the market economy's functioning character and we will have a strong lobby in Romania too, not only in Brussels.
''The Government, whichever it is, should understand that we were recognised this title due to a lot of geo-strategic and political goodwill and that indeed there's a lot still to be done for having a healthy business environment, without which Romania's can't get out of this current stagnant situation and big investments can not make progress. We have to justify this goodwill. Personally, I am very pleased,'' Baltazar stressed.
AmCham - Obtaining the status of functional market economy is an important step for an equitable business environment
The American Chamber of Trade in Romania (Am Cham) expressed its satisfaction for the CE conclusions about Romania fulfilling criteria for a functional market economy, the president of AmCham, Roberto Musneci said in a press release. AmCham members expect the government to set up a more attractive economic environment for EU and non EU investors by adopting and implementing necessary changes mentioned in the European document. AmCHam will continue to be for the government a partner for dialogue and consulting in fields concerning the business environment. The organization salutes the recognition by EU of the importance of the consulting process between authorities and the business community. AmCham also appreciates the fact that the report lays stress on and application of current laws and the development of the administrative capacity, in particular in the fields of fiscal administration, the protection of intellectual property and competition questions. As active part in the elaboration of the Fiscal Code, AmCham is offering its support to the Public Finance Ministry in the process of consolidating fiscal policies. AmCham considers encouraging the provisions of the document on the "excessively restrictive norms of the new Labor Code", considered "impediments for investments". AmCham has actively backed the amendment of labor laws, which are an indirect cause of the increase of labor costs that affects competitiveness of the specialized market in Romania. As for the Competition chapter, AmCham Romania is in full agreement with the conclusions of the report which consider that policies of the Competition Councils should be improved. AMCham wants to publicly offer its experience in backing the reform process carried out by the authorities, Robert Musneci said.
Functional market economy status will attract quality foreign investors
The status of functional market economy granted to Romania will attract quality foreign investors, multinational companies. However we must prove we understand what the status means, BRD president Bogdan Baltazar said.Multinational companies coming to Romania will contribute to the functional character of the market economy.
The government will have to understand we received the status "with a large doze of geo-strategic and political goodwill" We have much to do to set up a healthy business climate without which Romania cannot progress. "I myself am fully satisfied", Baltazar said. We have been goven a blank check. We will be monitored and we will have to understand it is a new opening with much to be done. As for the report entries about the banking system, they seem to be correct. The banking system in Romania is over 60% owned or controlled by quality western capital.Of all subsystems from macroeconomy, the banking system is by far the system with the largest presence of quality western capital and is the economy engine. We must all understand the banking system is not a charity body because it works with the clients' money and the banking system has to build financing projects, Baltazar considers. Credit in economy is fundamental but the promising financing area is rather reduced. On the other hand, beautiful macroeconomic aspects, GDP increase are little found in the rise of the living standard which influences the people's and companies' saving power on the long term. The average duration of the credit is at least three months and that leaves banks without financing resources, Baltazar said. There are market limits, but we hope that a new wave of foreign investment came with the restructuring and privatization process. As for bank supervision, the most important role of market supervision is that of shareholders. We have criticized the state for not having the courage to come out with a package of shares of 10-15% of lager company shares, of national companies, that such a market opening would have activated the stock market and would not be an obstacle for privatization with strategic investors, the BRD president said.
Foreign Investors Council - Conclusions of CE Report on Romania are motivation to continue reforms
The Foreign Investors Council (CIS) considers that the CE country report which acknowledges that Romania is a functional market economy will be a powerful motivation for the government to continue the rate of reforms and to improve the business climate, CIS informs.As for the second economic criterion - the capacity of the Romanian economy to cope with competition pressure in the EU market, CIS considers Romanian firms still have two years at their disposal to organize their activity and be prepared for the European market. Production units of multinational companies in Romania are already functioning at EU productivity levels and their products are at EU quality standards. Companies members of CIS are ready to share their experience with Romanian companies to support them in their efforts for renewal , increasing renewal capacity and adapting to their capacity to adapt to the single market. CIS will continue to back Romania in its efforts of improving the business environment and intends to bring out a new edition of the White Book to be launched in 2005. Every two years CIS published a White Book that offers an overview of the investment climate and includes recommendations for improving the business environment. In context, members of CIS are ready to support implementing the community acquis . CIS has 92 members whose cumulated investment in Romania exceeds 8 billion euros, two thirds of the total volume of foreign investments.
(source: ACT Media)
“Le Figaro”: Romania is new El Dorado for production transfer
Romania has become for many western companies a “new El Dorado” as regards the transfer of production facilities. Among the most representative industries for this tendency are the automotive, textile, furniture or IT ones, reads an article published in yesterday’s edition of Le Figaro. The latest model of Dacia carmaker, recently launched, is enjoying great success in Romania. The car also bears the mark of Renault, as a guarantee of quality, reads the French publication. Behind this brave bet of the relevant industry there is an entire army of automotive equipment producers that got involved in this adventure. Michelin already makes in Romania western-standard tyres, but which lack some options, which are not necessarily indispensable. After being greenlighted by Brussels, Romania, a country of the second wave, must find new arguments to attract foreign investors, firstly because it will remain for a while one of the cheapest areas in the EU. The average salary in Romania is EUR 170, that is 4 times lower than the one in Poland and Hungary and 10 times lower than in France. The French publication highlights that, in addition to the situation of salaries, Romanian employees proved to be well trained professionally. Among the fields in view is IT, which is increasingly often the object of activity transfer from West to East. Video game maker Ubisoft has had in Romania 60 programmers for 7 years. In its turn, Alcatel was among the first companies to have established the world maintenance centre in Timisoara by hiring in the past 10 years some 400 engineers. Another company present in Timisoara is Solectron, which has transferred there part of the activities run previously in Bordeaux. “The Small Vienna” of Romania, how Timisoara is called, has been for 15 years under a continuos development process, Le Figaro writes. The Italian investors alone set up in that area 12,000 companies, with over 150,000 direct employees and 500,000 indirect ones. Romania is at present the second provider of textile products for Italy, after China and before Tunisia. Therefore, Timisoara is linked by direct flights to Bologna, Rome, Florence, Milan, Venice, Treviso, Frankfurt, Munich and Stuttgart. The furniture industry has also entered a process of activity transfer to Eastern Europe. If 2 out of 3 products sold in France bear the stamp of local producers, a part of these are in fact made in Eastern Europe and assembled in France. This is the case of the furniture sold by the big distribution networks, for which price is the main selection criterion. Parisot Group, which makes furniture for Ikea, Conforama, But, La Redoute, Auchan and Leroy Merlin, created 2,000 jobs in Romania, versus the 3,000 back in France. Also the plastics industry has found in Romania “a new promise land.” An example in this sense is Plexirom of Bucharest, set up by Cristophe Benzimra with only 75,000 Francs. “It is an adventure that started 10 years ago, with 3 people and a surface of 100 sqm. Today we are 100 employees, and the production surface increased to 3,000 sqm,” Benzimra said. The key to success consists in level of costs, which enable Romania to compete with China, and in location. “In 4 days, a lorry can reach from here any European capital. This situation enables a good stock management, while in China one has to make large stock quantities and pay in advance,” Benzimra explained. Romania allowed the young French businessman to develop his company to a European level. “If I had remained in France, I would not have come to compete with China or enter the European market. I would have had, in the best case, some 15 employees,” Benzimra added.
(source: Nine O’Clock)
Romania Still Owed Important Sums by Various States
By the end of June, Romania had yet to recover from other countries debts amounting to a combined US$2.19 billion and over one billion transferable rubles (the currency formerly used in Comecon transactions), as well an additional amount in various other currencies. The debtors were mostly African, Asian, and Latin American states, according to a report on Romania’s receivables for exports, international cooperation, and other foreign activities carried out during the communist era. Every six months the government must brief the Parliament on uncollected foreign debts by means of such reports. There are different reasons for which these sums have not been collected so far. The 13-year embargo against Iraq, for example, prevented Romania from recovering a US$1.72 billion debt from the Baghdad government. Other debtors, particularly some African countries such as Sudan, Guinea, the Central African Republic, Congo, Zaire, Mozambique, Somalia, and Tanzania, have been in major economic and financial difficulties, including hard currency shortages. Among the eight of them, they owe Romania US$346.6 million. Furthermore, some of these countries (the Central African Republic, Congo, Zaire, Somalia, and Sudan) fall into the category of conflict-stricken or post-conflict nations requiring additional aid from international organizations. Finally, Cuban authorities have flatly refused to even start negotiations on a way to repay their debt to Romania, which accounts for 98.9 percent of the transferable ruble receivables.
(source: ACT Media)
Industry, retail trade and services estimated to be on increase, company managers say
Trading companies managers estimate in the next three months an increase in the activities conducted in industry, retail trade and services and a decrease in construction activities compared with the previous three months, show results of a survey conducted by the National Statistics Institute in October.
The survey says that over October-December an increase will be recorded in the economic activity of the processing industry (balance up 21 percent), this trend being backed by the evolution of the volume of contracts and orders (balance up 15 percent) and the stability trend of the number of employees. The upward trend of finished products will hold (balance up 13 percent).
Trading companies managers surveyed in October 2004 estimate a maintenance in the increase of goods sales in the retail trade for the next three months (balance up 34 percent). Some 45 percent of the respondents deem that the economic situation will be better, 47 percent think things will remain the same, while eight percent believe the situation will be worse off.
The volume of orders for goods placed with suppliers will record in October 2004 a balance of plus 38 percent. Traders keep tuning to the domestic market (balance up 33 percent). The volume of imported goods will be almost on a par with the one of orders in the previous period (balance up 10 percent).
Service providers managers estimate a maintenance of the upward trend on aggregate and of the demand for services in the next three months (balance up 22 percent), although not so sharp as in the previous period. The economic situation in the services sector has risen over the last three months (balance up 43 percent).
These estimates were derived following surveys conducted in the managers' rankings as regards the trends of economic activities. The surveys were carried out on a sample of 2,502 trading companies, 722 construction companies, 1,105 retailers and 869 services providers, the average error margin being +/- 8 percent. The surveys were done in co-financing and cooperation with the European Commission.
(source: ACT Media)
Exports bolster economic growth in H1, reads Economist Intelligence Unit report
The rapid growth of exports, the boom seen by domestic consumption and the high rate of fixed assets yielded 6.6 percent of economic growth in Romania in the first half of the year, reads a report of the Economist Intelligence Unit (EIU) issued in London.
According to the Romanian National Statistics Institute, fixed capital formation rose 10.4 percent in the first half of 2004, while domestic consumption hiked nine percent and government consumption six percent. The fastest growth was seen by building, rising 8.6 percent in the first half, after a seven-percent increase in 2003.
Domestic consumption, fuelled by increased crediting and a surge in real time revenue goes on growing faster than the GDP, the EIU report says.
The report includes a study on the long-term sustainability of the current economic growth, mentioning that over 2005-2009, economic growth may reach some 4.7 percent against the background of Romania meeting all Maastricht criteria for macroeconomic convergence.
The Economist analysis pinpoints the steady decrease in unemployment, the surge seen by wages as well as the upswing in energy prices fuelling the inflation in the third quarter.
As for financial indicators, the report highlights that the Romanian national currency, the leu, has gained 4.3 percentage points against the US dollar and 6.6 percent against the euro in real terms in the first nine months of the year, which, given the currency basket made up 75 percent of euros and 25 percent of dollars, accounts for real appreciation of six percent, exceeding BNR's two to four percent ceiling for the full year. The sector analysis on industry reveals the whooping results in building, both in the private and state sectors, as well as the boom seen by the automotive market. The EIU report predicts a current account deficit of 5.5 percent of the GDP in 2004, which, despite ''appearing to be relatively large,'' should not pose threats to capital inflow. The report speaks highly of overall reserves at Romania's National Bank, put at 10.870 billion euros at end-September 2004. Given their high level, Romania ''should not run into financial woes in the short to medium run.''
(source: ACT Media)
Zapp Internet Express - first broad band mobile communication service
Zapp mobile phone operator has launched the first broad band mobile communication services at national level - Zapp Internet Express - based on CDMA 1 x EV-DO technology, which allows data transfer at speeds of up to 2.4 Mbps. There are 8.3 million users of this technology in the world. Zapp estimates 300,000 subscribers until the end of the year, the level of investments made in 2004 being 50 million dollars. Zapp is the only mobile phone operator in Romania offering integrated communication services, developed on a last generation network (CDMA 2000 in 450 MHz band). CDMA is one of the most advanced wireless technologies in the world, developed and commercially exploited by the American communication company Qualcomm. The main shareholder of Zapp is Inquam Ltd., an international company supplying services in the field of mobile communication networks. The significant shareholders of Inquam are Qualcom, a leader in the market of mobile products and services based on CDMA technologies and Omnia Holdings Ltd, an investment fund in the Middle East.
(source: ACT Media)
1.3 billion euros in FDI for first eight months
The value of direct foreign investments registered over the time span ranging between January and August 2004 reached 1.3 billion euros, by 43 percent more than during the same time span of last year, based on the preliminary data provided by the National Bank of Romania, according to a press release of the Romanian Agency for Foreign Investments (ARIS). The latest data on investments point out a soaring trend in terms of foreign investors’ interest in those industrial branches which are able to absorb a growing potential, such as the automotive industry, furniture, electronic parts and IT, services and real estate. Until the end of the year, a record volume of FDI is expected, over two billion euros, which stands for a 25 percent increase compared to last year, based on the same press release. ARIS is currently conducting 45 projects with a cumulative value of 2.7 billion euros, which are in various stages, starting from the decision related to where the investment should be located up to the completion of the investment or beginning of production. Until the end of this year, further to the completion of the projects in progress, an estimated number of 10,800 jobs is expected. Most of the investments are greenfield ones and have benefited from the specific legal facilities provided to investors, such as location in industrial parks of various areas of this country. In September and in October, the portfolio of projects assisted by ARIS also included the projects conducted by the French company Montupet, with an investment of 120 million euros, and by Coficab Tunisia, with 25 million euros, both investments rounding the increasingly varied offer of the Romanian automotive production. In turn, the Italian company Pirelli has recently announced the start, in Slatina (southern Romania), of a partnership with the company Continental, within the new factory Cord Romania, an investment worth 40 million euros. Also during the same time span, ARIS’s project portfolio includes an investment in progress - a Wienerberger brick factory based in Gura Ocnitei, Dambovita County (southern Romania), with a value of 20 million euros, along with the announced intention of the German conglomerate Tengelmann to start a chain of 120 supermarkets in all the large cities of Romania, an investment worth 200 million euros.
(source: ACT Media)