miercuri, 4 iunie 2014

Business Review: No drama: Greeks adjust to post-crisis market

With over EUR 4 billion invested in Romania up until 2013, Greek investors have continued to seek local business opportunities, with close to 300 new companies with Greek capital having been registered last year.

The Hellenic business presence has remained intact in recent years, and even developed further, despite the ripple effects of the global economic crisis, according to Efrossyni Mita, counselor for economic and commercial affairs at the Embassy of Greece.

Greek foreign direct investments to Romania exceed EUR 4 billion, if the figure includes investments by companies of Greek interest via third countries such as Luxembourg, Cyprus or the Netherlands, according to estimates by the office for economic and commercial affairs at the Greek Embassy.

According to the national trade registry (ONRC), Greek FDI reached EUR 1.7 billion last year, accounting for 4.7 percent of total FDI. The National Bank of Romania (NBR) said that FDI from the Balkan country amounted to EUR 2.5 billion at the end of 2012, accounting for 4.3 percent of total investments. However, the central bank uses a different methodology to draw up data.

“A significant number of new Greek companies were registered during the years in question (e.n. the crisis period), 2013 included. This included big investors, as well as small and medium sized companies. In addition to newcomers, many Greek companies, already active in the market, proceeded with their investment plans,” Mita told BR.

Romania is home to 5,790 firms with Greek capital, out of which 295 were founded in 2013. They have created around 45,000 jobs in various sectors including banking, retail and manufacturing.

Meanwhile, trade between the two countries rose 5.5 percent to EUR 1.1 billion, with Greek exports to Romania gaining 6.3 percent to EUR 604.3 million, while Romanian exports to Greece rose by 10.9 percent to EUR 604.5 million.

“This positive trend shows that there is much room for further improvement,” said Mita.

Banking and telecom stand out

Greek investments are particularly notable in banking, with a 12 percent market share in terms of assets, and in telecom.

Four large Hellenic banking groups are present in Romania. Banca Romaneasca is owned by the National Bank of Greece (NBG), while EFG Eurobank controls Bancpost.  Meanwhile, Alpha Bank and Piraeus Bank operate under their own brands.

According to daily Ziarul Financiar, NBG will withdraw from Romania, having struck a deal with the EU’s anti-trust  body.

Banca Romaneasca’s assets amounted to RON 7 billion (EUR 1.5 billion) at the end of 2012. Aside from the lender, NBG’s Romanian operations include an insurer, a financial investment firm and a leasing company.

Meanwhile, Eurobank registered a EUR 40 million loss in Romania 2013, up by EUR 5 million over the previous year. Its assets fell 6 percent to EUR 3.8 billion.

Last year, Piraeus Bank sold a 93.2 percent stake in ATE Bank Romania to Romanian businessperson Dorinel Umbrarescu, in a EUR 10.3 million deal. The lender has been rebranded as Banca Romana de Credite si Investitii and will be run in a dualist system. Piraeus registered a gross profit of EUR 3.3 million last year, while its assets amounted to over EUR 2 billion.

Meanwhile, Alpha Bank posted a pre-tax loss of EUR 4.7 million in Romania last year on the back of higher provisioning for bad loans.

Moving to telecom, Romtelecom's total revenues amounted to EUR 609.5 million. Greek OTE controls 54 percent of the company’s shares, while the rest are held by the Romanian state. The state is planning to sell its stake through an initial public offering (IPO). Meanwhile, telecom operator Cosmote Romania, in which OTE holds a 70 percent stake, recorded revenues of EUR 458 million last year. Both Romtelecom and Cosmote registered a slight decrease in revenues year-on-year. The two companies will be rebranded as T-Mobile by September, which could represent another step in their merger, according to news portal

Gauging Greek investment sentiment

BR asked the heads of Greek firms active in various sectors about their experience in Romania and their outlook for 2014.

Ilias Pliatsikas, general manager at Olympus Romania, said the company had launched new products locally last year and that its turnover had grown by 41 percent to EUR 55 million in the same period. He said this had allowed Olympus to register its first profit since starting production at its Brasov-based plant in Halchiu. This year, the company expects a 30 percent hike in turnover. Olympus relies solely on milk from Romania for its plant and exports 70 percent of its output. “2014 is important for the dairy sector. The price and quality of the raw material will play a key role in the industry,” Pliatsikas told BR.

Dimitris Nikolakis, CEO of Druckfarben Romania, a manufacturer and supplier of inks and solvents for the flexible packaging industry, architectural paints and related products, said the company has been impacted by the economic crisis, which has changed consumption patterns.

“Romanian consumers’ shift towards more economical solutions in the last couple of years resulted in a slight decrease in the local turnover for both business units in 2013, offset by increased export activity to neighboring countries,” said Nikolakis.

“Due to the prevailing market conditions, the previous year was a transitional one for Druckfarben, in which the foundations were laid for the future strategic positioning of our brands and the expansion to previously unexplored areas,” he added.

He said the construction and building materials industries were expected to slightly decline or remain flat this year, depending on political developments. However, Nikolakis expects the paints business, represented by the brand Kraft Paints in Romania, to yield double-digit growth this year. He said the company holds 40 percent of the market for flexible packaging inks. The company is part of the Druckfarben group, which is active in the Balkans region with a consolidated turnover of over EUR 50 million.

The turnover in the local construction sector continued to fall in 2013, although some of the sector registered a revival, mainly due to private initiatives, which continued in the first quarter of this year, according to Alexandros Ignatiadis-  shareholder of Octagon Contracting & Engineering,  Dimitris Nikolakis- CEO, Druckfarben Romania, Effie Valsamaki-  general manager, Dirent Group, Ilias Papageorgiadis- CEO, More Group of companies.

 “Unfortunately, as this year is an electoral year, most of the public funds will be allotted to pensions and other areas that can bring votes, so the construction sector will not be a priority for public investments. At the same time, for pretty much the same reasons, the effervescence of the private sector has started to flatten out,” Alexandros Ignatiadis told BR. He said this year will be broadly similar to the previous one for construction. The company more than doubled its turnover to EUR 19.6 million last year against the previous one.  In 2014 the company is aiming to reach a turnover of EUR 16 million and to maintain its portfolio of clients.

Effie Valsamaki, general manager at Dirent Group, said the firm had seen its turnover in the operating leasing service fall due to a weak market, while the short-term rental service has increased since its launch in Romania three years ago. “Although the car rental market in Romania has not seen huge fluctuations over the last three years since the big drop of 2009-2010, Dirent’s specific service has gained a bigger market share every year. The expectation for this year is to increase the turnover of the rent-a car service by 50 percent,” Valsamaki  told BR.

“The used car business has faced various obstacles, mainly due to additional taxation and low demand, but the local market started to move much better at the beginning of 2014. For executive used vehicles with high engine capacity, the local market is still very difficult, the taxation very high, and prices would have to drop even more before local drivers would buy them. Otherwise  these vehicles will have to be sold on foreign markets,” she added.

Ilias Papageorgiadis, CEO of the MORE Group of companies, a consultancy, said that brokerage activities in the real estate sector recorded 7-8 percent growth last year. The company started to focus on income properties and investments in 2009. It grew its renewable energy business by 3.5-4 percent. In April 2013, the group decided to focus solely on biogas and biomass projects, due to changes to the incentives system.

“Biomass and biogas will attract Greek capital, as Greece does not have the advantages of Romania in this sector and lots of companies are scoping the market and moving onto the next steps. Once the situation is 100 percent clarified, you could witness a new wave of investments in this sector that could surprise an outsider,” the CEO told BR.  He added that demand in the real estate sector, especially for income-generating properties, such as farmland and forests.

Greek investors hold a 20-25 percent share in the overall portfolio of clients.

For Divertiland, the outdoor water entertainment park in eastern Bucharest, the first year of operations attracted over 100,000 people.

“This year we will concentrate our efforts on developing a complete customer experience and position Divertiland as a city break destination within the city. Some of our efforts will go into the development of additional activities, such as events and parties,” Alejandro Poulakis, the park’s CEO, told BR. He added that 20 percent of the total number of visitors last year were foreign.

Ambassador of Greece to Romania Grigorios Vassiloconstandakis says the euro’s current problems would most likely be solved by 2019, when Romania aims to join the Euro zone. His compatriots have invested over EUR 4 billion here and their development plans have continued despite the difficult economic situation.

BR: How are Greece and Romania collaborating in the economic field? What are the strong points and which areas still need improvement?
Ambassador: Greece and Romania have very strong relations in all domains of economic collaboration. This is due to historical reasons, cultural ties and geographical opportunity, and I must say that these bilateral economic relations are mainly characterized by a strong Greek business and investment presence in Romania.
The investment capital of Greek origin currently makes Greece the sixth biggest foreign investor. Total Greek investments have far exceeded EUR 4 billion, and I must stress that these investments are qualitative, reflecting the long-term Greek business presence in Romania. I believe that this is rightly appreciated, since all Greek firms have contributed to the modernization of the Romanian economy, and its gradual adaptation to the EU economic environment.
Of course, Romania’s subsequent membership of the EU greatly enhanced our bilateral relations. Trade advanced significantly in 2013 both from the point of view of Greek exports to Romania and Romanian exports to Greece. I believe there is room for a further increase in bilateral trade as well as in Romanian investments in Greece.

BR: What are Greece’s priorities for the EU presidency?
Ambassador: Greece has assumed the presidency at a time when Europe is going through an extremely delicate phase. We have had the crisis over the last few years, which resulted in recession and unemployment, shaken the confidence of high numbers of European citizens in EU institutions and gravely affected social cohesion.
Our challenge is to ensure prosperity and stability, because it is more and more obvious that the priority areas of our presidency cannot escape the pressing needs of European citizens today. In a few words: the promotion of policies and actions to achieve growth, combat unemployment, promote economic and social cohesion and structural reforms, deepening integration and completion of the European monetary union, as well as addressing external challenges, including EU enlargement, have formulated the priority framework of the Hellenic presidency.

BR: Does Greece support Romania’s Schengen accession and do you think that something will happen this year given the unfolding crisis in Ukraine?
Ambassador:  It is well known that Greece supports Romania’s accession to the Schengen area because we think that Romania fulfills all the technical criteria; it complies with the acquis communautaire (e.n. European Community laws) in this field. We are doing our best, now that we have the EU presidency this semester, to promote Romania’s candidacy for the Schengen area. As you know, of course, this is not totally dependent on us, because accession into the Schengen area is a complicated procedure and the role of the rotating presidency is different, so Romania’s accession will come down to a synthesis of different options, positions, views and trying to find, when conditions are right, the common denominator in order to reach consensus.
You know very well that unanimity is needed for this kind of decision, and we hope that consensus can be reached soon.

BR: Would you advise Romania to join the Euro zone, given the economic hardship suffered by Greece in recent years?
Ambassador: What we must say from the beginning is that Greece joined the Euro zone some 12 years ago, when nobody could predict the architecture, procedures, outcome and the possibility of the euro positively impacting the economies of the Euro zone. I think that following the crisis that started three-four years ago, all Europeans are aware of the problems related to the architecture of the euro asa common currency. And I think that over the last few years all of us have tried to find a new basis for this architecture so that the euro will never deal with the same difficulties we have gone through in the last few years. I understand that your prime minister has predicted that Romania could join the Euro zone at the end of the decade. The current problems of the euro would most likely be solved by then, and Romania, with its very good economic indicators, will be in a strong position to adopt the euro.

BR: Has the EU as a political entity emerged stronger from the recession?
Ambassador: The first big advantage of being a member of the EU is that all members define Europe as a common place to be – as a family, as a great area of activities (economic, political and cultural) andthis is an invaluable asset for all Europeans.
Of course problems and challenges frequently arise and the EU has to be ready to deal with them, taking into consideration its weight, not only economically, but also politically and diplomatically.
It is true that we are trying to move in that direction and these are the efforts made by the common institutions we all respect. That is the European Parliament; first of all, the European Commission, the Council, and I think that over the years this is the goal to which we are getting closer and closer.
But you are right and I think that the crisis like the one in our region, in Ukraine, indicates the need for coordination. And through dialogue and unanimity we have decided on a common response approved by all member states.

BR: We’ve seen more public officials jailed. Do you think that this is a genuine crackdownon corruption in the public sector?
Ambassador: I think that Romania, like Greece, has taken big steps forward concerning the anti-corruption fight. We can see that and all of us appreciate these big steps, which have taken place over the last few years – over the last year to be more specific. We are confident that Romania is on the right path in this field.

BR: What issues are raised by Greek investors doing business in Romania?
Ambassador: Greek investors consider the business environment in Romania a safe one. However we would like to see more stability and predictability in the legislative framework that applies to different domains of business and investment activity, especially regarding fiscal provisions and tax levels, as well as the incentives provided for investments in various economic fields. As an example, I could mention the changes in the renewable energy legislation and the insolvency law, but in general I understand that the biggest asset that Romania presents for foreign investments is the stability and security of the business environment.

(Sursa: Business Review, Autor- Ovidiu Posirca) 

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