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The Romanian-French tie - Pas de deux

As Romania's fourth-largest foreign investor with nearly 8,000 companies registered, France keeps looking at the local market as an important partner for doing business, with no exception this year. Alexandra Lopotaru talks to representatives of French Embassy, CCIFER and large French companies to measure the economic thread that ties both countries

2015-08-08 23:31:17 - From the Print Edition

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French investors have found business opportunities in Romania since the early '90s and have built a long-term relationship with the country over the years. At the end of November 2014, 7,976 companies with French capital were registered in Romania, of which around 3,500 are estimated to be active. The French direct investment value on the local market amounted to around 4.5 billion Euro (7.6 per cent of total FDI) at the end of 2013, according to a BNR report; a small reduction compared to 2011, but if it were to take into account all the investments made by French companies through foreign branches, the stock of FDI would reach seven billion Euro, according to CCIFER (French Chamber of Commerce and Industry in Romania) data. However, France remains the fourth-largest foreign investor in Romania, with important positions of French companies in all strategic sectors, including banking, energy, automotive industry, telecommunications, retail, pharmacy and agriculture. Moreover, almost 500 French companies registered with the CCIFER, of which the turnover represents 14 per cent of Romania′s GDP.

One of the main French investments this year in Romania is represented by Auchan′s recent acquisition of Real, giving the group more than 20 per cent of market share. Auchan has paid 257 million Euro for the acquisition of 20 Real hypermarkets from the local market, including work spaces where some attached shops and commercial galleries operate. Furthermore, Arval Romania, one of the top four companies specialized in operational leasing and corporate vehicle management, plans to invest 27 million Euro in the acquisition of 2,000 vehicles to reach a car fleet under management of 7,500 units. Orange wants to invest in Romania close to half a billion Euro by 2020, while more than 110 million Euro will be invested this year. In addition, Renault Romania is planning to inject another 100 million Euro on the local market by the end of 2015, while manufacturer of construction materials Saint-Gobain Construction Products Romania - Rigips Business Unit obtained the agreement of French-based Saint-Gobain Group to invest 1.5 million Euro in high-tech equipment in its Turda plaster plant in order to increase the efficiency of its technological processes.

Following big international companies, many SMEs have entered the Romanian market also, specifically in the industry sector. At the same time, one can notice an increased interest of the present French investors in localizing in Romania shared service centres, such as Orange, Michelin, Renault and Societe Generale. Analysing Romania′s economic perspectives in H1, Eric Faidy, the president of CCIFER, sees a positive trend among French companies, noticing also a "real dynamic" from the newcomers and an optimistic perspective from the investors that are already in the market.
"Historically speaking, the French - Romanian relationships are very positive," Faidy tells The Diplomat - Bucharest. "French investors were among the first ones to penetrate the Romanian market and no major company left the country during the crisis. French groups were confident and continued to invest during the crisis and to consolidate their local position, when others preferred to leave. Therefore we can see the positive results we achieved so far. Furthermore, our quarterly barometer showed an optimistic trend in the beginning of the year and throughout all the consultations we had with the companies we can easily confirm this perception."

Romania′s macroeconomic scenario was reshaped in 2015 due to the recently adopted fiscal measures stipulated in the new Fiscal Code. Real GDP is currently forecast to grow by 3.3 per cent in 2015 and unemployment is forecast to decrease substantially. Domestic demand remains the growth driver, experts say, supported by an improvement in labour market conditions. Furthermore, the current account is expected to remain broadly stable at 0.8 per cent of GDP in 2015 and inflation to reach record low levels at 0.3 per cent in 2015. In this conditions, the economic environment seems to regain stability and start to offer predictability, two main aspects foreign investors are looking for, including French companies.

"Investment decisions need quite a long maturation," Benoit Gauthier, head of the Economic mission at the French Embassy in Romania, tells The Diplomat - Bucharest. "Investors are looking for predictability and stability in the long term on legislative, regulatory and taxation systems. But they need moreover a friendly business environment, i.e. good perspectives for the business they are willing to run, but also efficient educational and vocational training systems, supportive tax systems for innovation and development, and infrastructures at the European standards."

He adds that after the adoption of the new Fiscal Code, the real GDP is currently forecast to grow by 4.0 per cent in 2016. "Reflecting strong growth, unemployment is forecast to decrease substantially," says Gauthier. "In the absence of compensatory measures, the fiscal reform could reverse the fiscal adjustment path in 2016. The consensus forecasts a deficit of three per cent of GDP for 2016, in the absence of compensatory measures and cuts in public investment. But strong external demand, namely from the European Union, could maintain the positive trend of the industrial exporting sectors such as automotive, textile or machinery."

Bilateral exchange reached 6.6 billion Euro

In continuation of the positive dynamics in 2013, France maintains its position as the third-largest recipient of Romanian exports and the fourth-largest trading partner in terms of imports. According to CCIFER, French market share stabilized at 6.8 per cent for Romanian exports towards France and 5.7 per cent for imports from France. The bilateral trade between the countries remained dynamic in 2014 also, with a growth rate of four per cent compared to 2013, up to 6.6 billion Euro, according to the French Embassy in Romania. Such a dynamism was mainly pulled up by Romanian exports to France, which grew by 5.1 per cent. French exports, although increasing, were less dynamic (2.5 per cent) at 3.4 billion EUR.

The structure of trade between France and Romania is relatively balanced: France exports mainly transportation equipment and industrial equipment, with 54 per cent of its total shipments to Romania - of which ten per cent are motor vehicles, chemical and pharmaceutical products to the tune of 9.5 per cent, metallurgical and metal products at ten per cent and food products at six per cent of its exports. Romanian exports to France include capital goods, transport equipment (49 per cent of total) and textiles (16 per cent of total). After a sharp increase in Romanian exports to France during the crisis, bilateral trade has been progressively rebalanced through the resumption of French exports since 2010, which resulted by reducing the trade deficit accumulated by France. However, the French trade excess tends to decrease, with a decline of 19 per cent y-o-y, down to 292 million EUR in 2014.

Cyclical factors such as strong consumption in Romania and progressive rebalancing of the Euro-Dollar parity have contributed to the dynamism of Romania′s exports in 2014, according to Benoit Gauthier, head of the Economic mission at the French Embassy in Romania. Nonetheless, he adds that bilateral trade is now largely determined by the importance of French production investments in Romania, particularly in the automotive industry. "Much of our exports today are constituted by the supply chain of French groups in the context of intra-firm trade," says Gauthier. "This is particularly the case in the automotive industry, but also in the engineering industry, plastics, textiles, services and specialized retail," he concludes.

Next, The Diplomat - Bucharest talks to several key French players in the domestic market in order to find out more about their development in the first half of 2015, to uncover the main advantages and disadvantages of the local market and to establish their most important business objectives for 2015.

ALD Automotive plans to reach 9,000 vehicles this year

French-based ALD Automotive Romania, one of the main operational leasing and fleet management companies on the local market, ended the year of 2014 with a turnover of 30.2 million Euro, according to the group-reporting system, and a car fleet under management of 8,386 vehicles, a 15 per cent increase compared to 2013, when it had 7,280 units. For 2015, ALD expects to register growth in both turnover and client portfolio, as it plans to reach a fleet close to 9,000 vehicles, up seven per cent compared to 2014.

"In 2015, we are looking at a recovering market in the automotive sector, with a good potential," Shane Dowling, the general manager of ALD Automotive Romania, tells The Diplomat - Bucharest. "ALD Automotive clients are also transitioning through a recovery period and this can only have a positive impact on our business. In 2014 we maintained our market share at 17 per cent and we have grown the number of clients in our portfolio. Although the first six months of 2015 has seen a stable growth for ALD Automotive, we believe that the second half of the year will generate an organic growth pattern. Our prediction for the next six months remains positive and we are on the right track of ending 2015 with a fleet close to 9,000 vehicles."

The company's business portfolio expanded last year, reaching 270 companies from segments such as pharma, FMCG, insurance, IT and telecom. Almost 80 per cent of the ALD Automotive national car fleet is under a full service operational leasing contract while the remaining 20 per cent represents fleet management. This year, ALD added to its portfolio another 39 new customers, while 73 of its customers renewed their vehicle fleets. In the past years, the main focus of ALD was on large international corporations, which now account for the majority of the total fleet. In order to achieve further growth, however, the GM says that the company needs to look beyond the secured large corporate sector and focus its attention towards a niche with huge potential: SMEs.

"We are always thinking long term and we are trying to adapt to the market dynamics and the demands issued by our targeted future clients," says Dowling. "ALD Automotive is approaching a new segment of clients, SMEs, being a sector with a growing potential. SMEs are definitely one of the pillars of Romania's economy and it is our responsibility to support them and to provide customized solutions for the cost optimization of their businesses."

Discussing the auto market in general, compared to the same period last year, Dowling observes a spike in auto sales, where players from dealerships to manufacturers are seeing better numbers in their business. With a 17.9 per cent growth according to APIA for auto sales in the first six months compared to the same period of last year, the positive trend is touching the operational leasing industry as well, as about 77 per cent of the new vehicles sales are generated by companies. However, the biggest challenge in 2015 for companies remains cost optimization, says ALD's GM, managers being keen on increasing their operational efficiency.

"There are sveral ways a company can become more efficient, but we are interested in healthy solutions," says Dowling. "One of these methods is the operational leasing and as more companies start to understand its benefits, the more incentives we get to be more competitive, offer innovative cost control solutions and high quality services that meet our clients' expectations."
As a 2015 objective, ALD Automotive will continue its investment in services, with a strong focus on mobility and instant information access for its clients. Operational in Romania since 2005, ALD Automotive is the subsidiary of BRD - Groupe Societe Generale and the ALD Automotive group.

Arval plans to reach 7,500 vehicles under management by the end of 2015

Arval Romania, one of the top four companies specialized in operational leasing and corporate vehicle management, invested last year 31 million Euro in the purchase of around 2,500 vehicles to reach a car fleet of 5,500 vehicles. This year, the company plans to keep up the pace and invest another 27 million Euro in the acquisition of 2,000 units as Arval's business is on an upwards trend, according to Dan Boiangiu, general manager of the company.

"Romania's operational leasing industry grew year-on-year and so did we," Boiangiu tells The Diplomat - Bucharest. "For us, 2014 was a very good year and the trend has maintained so far. From the beginning of the year until May, we saw a 22.5 per cent increase in terms of new contracts compared to the similar period last year and a 33 per cent rise in terms of total car fleet compared to January-May 2014. Based on how things are going right now, we expect to reach 7,500 units by the end of the year."

Arval increased its client portfolio in H1 by 20 new customers, reaching 360 clients at the end of May compared to 340 in 2014. If last year the company attracted two important customers from telecom, this year agriculture and retail seem to be main drivers. "Opportunities are everywhere and we have to be efficient to take full advantage of those we see," says Boiangiu. "However, analysing each segment, I would say that pharma is not very active in 2015 due a process of global restructuring within the sector, but I am very content about two segments: agriculture - especially the seed industry which needs a lot of mobility - and retail, where more and more shops are being opened, requiring a lot of vehicles. Overall, the level of trust in Romania's economy is positive and, with few exceptions, everybody wants to expand their business. This can be translated into expanding ours."

Speaking about Romania's operational leasing market in general, Boiangiu reveals that it surpassed 50,000 vehicles under management at the end of the first quarter of 2015, which means an increase of 16 per cent compared to the first quarter of last year. By the end of the year, he expects to see ten per cent market growth. "The market is very competitive and everyone focuses on becoming better and better," says Boiangiu. "Romania has a lot of potential in this field and my colleagues from ASLO [Operational Leasing Companies Association] estimated that the local market could reach up to 100,000 vehicles. I wouldn't be surprised, but it all depends on the economic development," he concludes.

The business of Arval Romania, which has been present on the local market since 2006, is mainly focused on international companies. Last year, the company posted a turnover of 33 million Euro, similar to 2014's figure, and expects to end 2015 with a ten per cent business growth. As a subsidiary of French bank BNP Paribas, Arval Group is present in 39 countries (in 25 directly and in 14 through partners), managing 725,000 vehicles.

Groupama Asigurari sees growth signals in the market

Romania's business environment has started the recovery process after the difficult years marked by the economic crisis and managers of important companies are noticing the trend. This is also the case with Francois Coste, CEO of Groupama Asigurari, one of the main insurers on the local market, who reports that 2014 was characterized by growth and the beginning of 2015 seems to keep the same pace. However, although the business environment is witnessing positive perspectives, the Romanian market has not reached its maximum potential yet, he says, and doing business in Romania remains a challenge due to lack of predictability.

"2015 came with a feeling and perspectives for economic growth," Coste tells The Diplomat - Bucharest. "All business segments that are of interest to us are seeing a slight increase, and people seem to have more money to spend, as minimum salary is increasing and VAT for food was decreased. (…) The perspectives for this year seem good. Still, we are reserved on the growth perspectives due to the lack of predictability of the economic and political measures. Some laws proposed, not fully analysed and discussed, could affect the business environment and unbalance the expectations. Also, the insurance market in particular is highly influenced both by regulations and by the unexpected events."

Last year, Groupama Asigurari registered over 700 million RON (around 155.5 million Euro) in gross written premiums and a profit of 13.5 million RON (around three million Euro). For 2015, the company estimates a ten per cent growth of the turnover and a gross profit rise by around 50 per cent, to reach 20 million RON (around 4.5 million Euro). According to Coste, Groupama is the fourth-largest player in the market, the leader of the agriculture and optional home insurance, second in CASCO and property business lines, and the fourth-largest insurer in health and accidents lines.

"In 2014, Groupama become profitable, so, 2015 is for us the year of sustainable growth," he says. "We are the leader of the agro business line and we hold the second position in the property and CASCO lines. Private health insurance has shown to be quite dynamic. We entered this market a little over two years ago and we are now one the leading players of this market with more than 40,000 people insured for their health, holding the fourth place in the market. Our goal is to become Romanians' preferred insurer, while conducting a long-term sustainable and profitable business."
In terms of other objectives, Groupama plans to further focus on innovation, both at the group's level and locally. This year, the company's main investments will be in optimizing the costs and increasing the quality of the client servicing. The company became operational in 2009 on the local market.

Mazars's Schoeb: "2015 will close positive despite the Greek turmoil"

With an encouraging GDP growth, an increasing household consumption and also an improving EU funds utilization, Romania stands on good grounds for further growth in 2015, according to Rene Schoeb, country managing partner at Mazars Romania, a French-based company specialised in the fields of audit and advisory services for accounting and financial, management, and tax and legal matters. The positive signs have already been perceived by foreign investors and FDI resumed the positive trend, with a significant increase in the first quarter of the year. This is an important change after a long time of dramatic decrease of this indicator, says Schoeb, as the company feels it in the increase of the M&A activity of its clients.

"Romania has started out 2015 on a strong note and currently is well positioned from the macroeconomic point of view," Schoeb tells The Diplomat - Bucharest. "Romania proved lately that it has the capacity to obtain growth against difficult regional and global contexts. This is an important signal. Besides the valuable human potential, Romania's recent macroeconomic evolution also became an important piece of the game for attracting investors. For each measure that influences its economic stability, Romania has to prove maturity and consistency in order to further capitalize on this advantage in the tough global competition for foreign investments."

Although the general economic perspectives are optimistic, Schoeb confesses that Romania still needs to pass many difficult tests before achieving steady economic growth. Big challenges remain, caused either by the global context or the local specifics: the increasing uncertainty in the Eurozone, the budgetary pressure expected in the context of the parliamentary elections scheduled for 2016, the need to continue the structural reforms and the modernization of the public administration. "The recent debate on the Tax Code and the fiscal relief also brought the need to improve the general living standards and the fiscal framework without shaking the budget stability in the spotlight," says Schoeb. "The answers to these challenges can influence Romania's evolution over the next years. However, we believe that 2015 will close positive despite the Greek turmoil."

Mazars Romania has been continuously developing its activity and client portfolio, according to the country managing partner, by diversifying and expanding its expertise in industries such as financial services, real estate and construction, energy, automotive or retail and FMCG. In the 2013-2014 financial year, the company's annual turnover in Euro went up by 28 per cent. This increase was particularly due to the merger with Adevaris, in September 2013. The support for this evolution was the two-figure growth of each of the main business lines: audit and financial advisory services, tax consultancy, accounting and payroll. The current financial year is about to be closed in the third quarter of the year and it looks promising to Schoeb.

"We are benefiting from a good momentum as of last year and were able to win some significant projects, namely three Balance Sheet Reviews in the course of the stress tests of the Romanian Insurance Market by the local and European Regulator," says Mazars's Schoeb. "In the second half of the year we intend to further consolidate our strong position on the Romanian Professional Services market and launch some new initiatives."

In terms of other objectives for the next years, Mazars Romania wants to further develop its key business lines - audit, tax, accounting and advisory. The company became operational in 1995 and counts around 150 employees in Bucharest. Globally, Mazars is present in 73 companies and has 15,000 people.

Orange wants to invest half a billion Euro by 2020

Excluding the impact of the regulations, French-based Orange Romania posted in the first quarter of 2015 a 6.4 per cent growth in revenues, managing to maintain profitability, increase the leadership on the mobile market and continue to invest in the local network. According to Jean-Francois Fallacher, CEO of the company, Orange wants to invest in Romania close to half a billion Euro by 2020, while more than 110 million Euro will be invested this year. The company′s investments plan includes urban and rural network refresh, and services and products like Orange TV, that are in their early stage and will continue to grow, says the CEO.

"Orange had a very good evolution in the first part of the year, as the investments we've made so far in a strong infrastructure and advanced services are paying off," Fallacher tells The Diplomat - Bucharest. "We are continuously investing in the network, to offer performant services all across the country as customers keep adopting mobile internet (...) Our ambition for the next five years, set through our strategy "Essentials2020", is to provide everyone with an enhanced customer experience, by designing the digital services that allow our customers to enjoy what is essential to them. Thus, we committed to invest in Romania close to half a billion euro by 2020, while more than 110 million Euro will be invested this year. "

In the first quarter of the year, the internet traffic doubled in Orange network compared to the same period of last year. Thirteen times more customers used Orange 4G high speed internet, while tablets and smartphones continued to find more adepts. Sales grew by 50-60 per cent in the same period. Moreover, by the end of March, Orange TV service, which the company built two years ago as a multiscreen service adapted to the latest consumption habits, reached 190,000 subscribers, while the app for mobile devices had gathered over 1.1 million downloads and updates. "We also made a step further through the Orange TV stick, allowing customers to carry with them their favourite movies or shows and watch them on the TV screen even when they visit friends or go to their country house," says the CEO. "Our plans are to continue to develop the service and to extend the content catalogue, for a larger variety of choices."

Speaking about the current economic perspectives of Romania, Fallacher is optimistic about the direction the country is heading and believes that consumption is one of the key drivers of economic growth. "Since I came to Romania, I had the opportunity to see how the country is transforming in a good way - with its challenges, of course - but also with a lot of opportunities to seize and capitalize on," he says. "2015 had a good start both for the Romanian economy and for Orange Romania, so I have some good reasons to be optimistic. The positive review of GDP initial estimations up to four per cent for 2015 confirms the good direction in which the economy was engaged. I believe and I hope as well that the economy will continue its sustained growth trend, with consumption considered to be one of the key drivers. What we noticed as well is that customers continue to pay attention to the price, but the overall good experience with a product or service weighs a lot in the buying decision."

Last year, the revenues of Orange Romania reached 909 million Euro, out of which 233 million Euro arrived in the last quarter. Eliminating the impact of regulations, revenue growth in 2014 was of 4.2 per cent versus the previous year, while taking it into consideration, the total revenue decreased by 2.7 per cent. Fallacher expects to get back to growth this year, sustained by the increasing adoption of mobile internet services. In 2014, more than 2,900 employees were working at Orange, 500 being involved in outsourcing activities for Orange Group, at Orange Services. At end of March 2015, the number of employees working for Orange Romania and Orange Services was around 3,000 and it is expected to remain stable through the end of the year.

Renault wants to deliver 20 per cent of production capacity on domestic market in the future

Present on the market since 1999, by taking over the Dacia carmaker plant in Mioveni, French-based Renault Romania has around 16,700 employees and posted a turnover of almost 4.6 billion Euro last year. The company represents around three per cent of Romania's GDP and eight per cent of the country's exports due to the fact that more than 90 per cent of the cars manufactured in Mioveni are sent abroad. One of the main objectives of Renault for the coming years is to increase the share of the vehicles delivered on the local market in order to reach up to 20 per cent of total production, according to Nicolas Maure, the president and general manager of Dacia and general manager of Renault Romania.

"The Mioveni plant exports more than 90 per cent of its production, so the rest that goes on the local market is not enough to restart it as we would like to," Maure tells The Diplomat - Bucharest. "The national market for new vehicles in Romania should achieve a significant growth in the three years to come, hopefully a doubling of up to 200,000 units per year. Doing so, our Mioveni plant would be dedicating a minimum 20 per cent of its capacity to our home market, which we consider to be back to ‘normal'."

The production capacity of the last two years was close to the installed capacity of the Mioveni plant of 350,000 units per year, namely 343,000 units in 2013 and 339,000 units in 2014. This year, the company might reach a record of production as the demand for Dacia model is high, both in Romania and for export markets, says Maure. In terms of investments, Renault has invested more than two billion Euro in the last 16 years. Moreover, the company is planning to inject another 100 million Euro on the local market by the end of 2015, which includes new vehicle variants like Euro 6 introduction, Titu Technical centre additions and improvements for the Mioveni plants.

"Our main priority for the coming years is to maintain our activities in Romania through replacement products introduction and renewed competitiveness of our operations, to keep our good position in even more demanding markets," says Maure. "We are considering progressive introduction of automation within both vehicle and powertrain plants. We are talking about a step by step programme which takes into consideration the workforce employment level. This automation will also contribute to even higher quality and even better work conditions within the plants," he concludes. The Group is distributing three brands in Romania, with Dacia representing 31 per cent market share last year, Renault - seven per cent and Nissan - two per cent.

Saint-Gobain Rigips to invest 1.5 million Euro this year

This year, manufacturer of construction materials Saint-Gobain Construction Products Romania - Rigips Business Unit obtained the agreement of French-based Saint-Gobain Group to invest in high-tech equipment in Turda plaster plant in order to increase the efficiency of its technological processes. The investment amounts to around 1.5 million Euro, the project being partially co-financed by the European Fund for Regional Development based on the Sectorial Operational Programme "Increase of Economic Competitiveness" managed by the Ministry of European Funds. The overall objective of such a project is to increase the productivity of its bagging, palletizing and packaging lines of the plaster plant operated by Saint-Gobain Construction Products Romania - Rigips Business Unit, based on the extension, modernization and automation of its technological processes. The investment project is to be completed by the end of 2015.

"The level of our company's investments in its industrial units and environmental protection amounts to more than 68 million Euro," Constantin Hariton, general manager of Saint-Gobain Construction Products, Rigips Business Unit, tells The Diplomat - Bucharest. "Our company has an annual investment plan ranging between 1.3 and 2.2 million Euro, directed towards upgrading production facilities, efficient industrial processes, environmental protection and sustainable development. Annually, we start off plans for re-creating the natural environment based on terracing, planting in the areas used for our exploitation works near the quarry in Turda. We have also invested about 270,000 Euro in a pilot unit for recycling plasterboard wastes, the first of its kind in the country, enabling the re-use of waste, reducing thus the use of natural rock from the quarry and minimizing the environmental impact."

Saint-Gobain Group, one of the main global players in the habitat and construction markets, is divided into four divisions in Romania: Saint-Gobain Construction Products Romania, with its four business units - Isover, PAM, Rigips and Weber, Saint-Gobain Glass Romania with Glass and Abrasives divisions, followed by MTI Impex Brasov and Brodrene Dahl. The turnover of Saint-Gobain Construction Products Romania in 2014 reached 62 million Euro, with the Rigips business unit representing about 42-45 per cent of the total turnover recorded by Saint-Gobain in Romania. According to Hariton, the company expects to register a small growth by the end of the year as the construction sector saw positive signals in Q1.

"Referring strictly to the construction market on which we are active for more than twenty years, the first quarter of this year came with better signs for the construction sector and hence for our company, having recorded some increase as compared to the same period in 2014," Hariton tells The Diplomat - Bucharest. "We expect a more positive development of the market this year, with final increase ranging between three per cent and four per cent, but without having the certainty that this growth will be achieved, due to the lack of predictability of the Romanian economy. It happened in previous years that after a good start the market experienced a significant fall, concluding the year on a negative trend, so we are being cautious in our assessments."

Hariton goes on to add that the building market will be primarily driven by the increase registered on the residential market since last year, by the positive trend of the renovation and refurbishing works, and also by the evolution of the non-residential buildings segment, which has also registered an increase as compared to 2014. "As a prerequisite for growth, our estimates are based on the large number of residential projects and the non-residential segment, and I am referring to large projects, particularly office and commercial buildings," he says. "Taking all these into account, I would conclude that 2015 foreshadows normalcy and stability for the economic environment in Romania, leaving apart a series of factors that may at any time turn this situation upside down, such as the impact of a further deterioration in geopolitical tensions from the Ukraine-Russia conflict hurting not only the market confidence, but also that of major trading partners."

Saint-Gobain Rigips has projects oriented towards innovative products and wants to build as many green buildings as possible, says Hariton, the company having been recently certified as a solution provider for building "Green Homes" by the Romanian Green Building Council (RoGBC). Another objective of the company is oriented towards the continuous training and improving of the knowledge and skills of its employees. Saint-Gobain operates twelve production units in Romania, in eight industrial sites in Brasov, Branesti, Calarasi, Ploiesti, Satu-Mare, Tulcea, Turda and Suceava, having more than 1,100 employees. The Group operates in 64 countries and has over 190,000 employees worldwide. Saint-Gobain sales in 2013 amounted to 42 billion Euro.

SG EBS to increase the headcount by more than 50 per cent in 2015

French-based Societe Generale European Business Services (SG EBS), the nearshore shared service centre supporting the activities of the Societe Generale Group European entities, plans to hire more than 200 people this year, surpassing 600 team members, according to Philippe Garcet, CEO of SG EBS. This represents around 50 per cent growth compared to 2014, when it registered 400 people. Half of the new professionals will work in the IT centre, created in late 2014 for development, maintenance and application support, while the other half will be integrated within the SSC′s other two lines of business, namely finance (accounting and financial services) and Human Resources.
"Romania is a key country for us and our objective is to stay here for the long run," Garcet tells The Diplomat - Bucharest. "The prospects for this year are very positive. The GDP is growing, inflation is well under control and the unemployment market is pretty stable. So, the global framework seems positive and the trend should carry on for the rest of the year. In this context, we grew as well. Last year, we doubled our team members and reached 400 people. Since the beginning of 2015 [the interview was conducted in mid-June], we have increased by 20-40 per cent. We will not double this year, but I suspect we will see a 50-60 per cent growth."

The business services industry, comprising BPO, SSC, ITO and R&D, had up to 200 employees in 2004, while now it counts 60,000 people with the potential to triple in the next five years. If at the beginning there were low-end services, with basic operations, now the market attracts more and more complex services. For instance, SG EBS took over last year regulatory reporting activities, full financial production and control for more than 300 entities and set up a centre of expertise on HR information systems for Europe. Moreover, the shared service centre decided to expand its activities and set up an IT line of business in late 2014 as well. According to Garcet, the IT Shared Service Centre will take advantage of the high quality of the IT population, as well as its language skills, to provide high-end IT services, using agile and continuous delivery methods. Hence, the company's model is not to operate a small share of the software delivery life cycle, but rather "to take full ownership and control of business critical applications for the bank, in direct contact with the business."

"A decade ago, the market was almost non-existent," says Garcet. "However, since then, it has grown pretty significantly and it contributes - more or less - to 1.5 to two billion Euro in terms of GDP, which is sizeable for the country. I see the business services industry as a pretty dynamic market nowadays. I think we've reached a point where Romania can position itself not as a heavyweight - like India and East Asian countries - but more as a challenger, operating on specific niches, where the value offer is not driven only by the price, but also by the quality of delivered services, the ability to improve them such as the capability to provide services in the client language."

On the local market, SG EBS is present since 2011 and operates in up to ten languages. Geographically, the centre focuses on Europe, with France representing 68 per cent, followed by Western Europe (24 per cent) and Romania (eight per cent). Asked about the possibility to expand into a Tier 2 city in the future, Garcet reveals that the Group does not exclude this aspect: if the SSC reaches a certain size, a second centre will be needed. "As long as we are under 1,000 [employees], we can consolidate on one single city," he says. "However, if we foresee that we will go beyond this mark, the split between cities will likely be required. We will probably need to anticipate and assess which could be the candidate city so that we will be ready when the time comes," he concludes.

Veolia's Saniuta: "I see H1 as a first step towards re-establishing a coherent legal framework for energy"

Present on the Romanian market through activities in energy and water treatment, Veolia Romania posted last year a turnover close to 300 million Euro and reached a number of employees of around 2,400 people. Lavinia Saniuta, country director Veolia for Romania and general manager of Apa Nova Bucuresti, believes that the Romanian energy sector is starting to regain its importance as a field of national and strategic importance for citizens and the Government and sees the first half of 2015 as a first step towards re-establishing a coherent legal framework to develop Romania's energy sector in the future.

"A 25-year history of subsidies and minimal investments in centralized heating has brought our country to the question ′what will become of the energy sector?′ in the context of European rules and regulations that sustain and impose energy efficiency and autonomy, reduction of CO2 emissions, viable and zero-risk energy sources," Saniuta tells The Diplomat - Bucharest. "I perceive these first six months as a first step towards the correct direction and towards re-establishing the coherent legal framework to sustain and continue to develop Romania's energy sector in the following years, while putting a specific emphasis on long-term environment-friendly solutions, such as cogeneration. Once the legal principles and rules are established and coordinated with international demands, the energy market will become an open business field for the operators which can develop and sustain durable partnerships with local authorities, for the benefit and comfort of people who use centralized heating."

Saniuta goes on to add that fragmented changes in laws and regulations, even if for the better, do not have the power to create a unity. For the public utilities sector, the change in legislation has to be both central and local, done in a coherent and structured manner that can create a solid work environment and the premises to sustain, maintain and further develop public utilities providers, either public or private. "All investors blame the lack of transparency, predictability and sometimes, lack of coherence," says the country director Veolia for Romania. "In my opinion, where the district heating systems are concerned, our starting point should be the local reality where disconnection from a public utility system is concerned, and only then we can discuss harmonizing legislation to the European Union demands."

Veolia′s business targets are cities which provide with great difficulty or are even becoming unable to provide heating and hot water for their inhabitants and the Romanian landscape seems to fit this profile. Following an international call for tenders in 2012, the Iasi municipal council appointed Veolia Energie Romania to operate the city district heating network. The contract is for the generation, transmission, distribution and supply of heating for a period of 20 years and Veolia Energie Iasi has done a lot of work so far. However, in 2015 so far, there have been four important hotels to connect to the public heating system, two sports clubs, two public institutions and there are more to come, says Saniuta.

"Locally, in front of our clients, these success stories are the best business card we could show to our potential and future clients," she says. "The only other thing I can say about our development plans for the rest of the year is that 2015 is not yet over. A solid basis for a company is not created exclusively by financial results, but by building and maintaining its credibility, reliability and image in the eyes of its clients and employees," she concludes.

Simona Cocos, Zentiva: "Health should be considered a high priority by the Romanian authorities"

Pharmaceutical company Zentiva Romania, part of French-based Sanofi Group since March 2009, is the market leader in terms of volumes on the generic market, according to the company data, last year registering a market share of 16 per cent. In terms of value, the company reached the fourth position with a market share of 9.1 per cent and a level of over 260 million RON (around 58.4 million Euro). Simona Cocos, general manager of Zentiva Romania, tells The Diplomat - Bucharest that while the general economic perspective seem to be positive, the Romanian healthcare system still faces a lot of challenges and changes that are, sometimes, implemented without a detailed impact and risk assessment. Moreover, according to her, health should be considered a high priority by the Romanian authorities, because health is a precondition for economic prosperity.

"According to INS, the economy grew by 4.2 per cent in Q1 2015 compared to the same period of 2014," says Cocos. "In addition, if I look at the forecast for this year, all macro-economic indicators - the GDP growth, the budget deficit, the country debt and the unemployment rate - show Romania is better than Euro Zone. But if I look at our industry specifically and at the entire healthcare system, then things are not at all so optimistic. The Romanian healthcare system is facing a lot of challenges and changes that are sometimes implemented without a detailed impact and risk assessment. We miss the clear long-term strategic vision. Also, it is important to mention that Romanians' life expectancy is eight years lower compared to the European countries and the health budget is among the lowest in Europe (4.5 per cent of GDP). Or, for further economic growth, health should be considered a high priority by the Romanian authorities."

In terms of legislative perspectives, Cocos confesses that authorities made a lot of steps to reform the system: price decrease for improved drug affordability, dual pricing catalogues for keeping a good level of drug prices in the EU (referring to the 13 countries basket), electronic card, while the negotiations for cost-volume agreements started with the pharma players. However, there are many other aspects that should be improved within the healthcare system. According to her, it is of crucial importance to address the patients' real needs and expectations in an integrated perspective. "First of all, the integrated approach of the healthcare challenges should start from an overall increase of the health budget, a better management of the existing financial resources and an improved cost containment mechanism which can guarantee a good control of drug spending in a more efficient way than the current claw back system," she says. "Last, but not at all least, it is necessary to have an efficient tracking system that can ensure at all times the treatment availability on the local market for Romanian patients."

Since the beginning of the year, about 13 million Zentiva pharmaceuticals reached Romanian households and the company plans to launch seven new products in the following period, enlarging its portfolio. More than 80 per cent of Zentiva′s portfolio is being produced locally in its Bucharest plant. Between 2010 - 2014, more than 14.5 million Euro were invested in building new manufacturing workshop (pellets), a new Laboratory centre for Europe markets performing testing and releasing activity and new equipment for production, laboratories, upgrades for utilities and technical areas. For the next four years, the company will invest an additional 7.5 million Euro for continuing the factory's modernization and the production equipment upgrade.

Not only Romanians benefit from Zentiva products manufactured locally, but also European patients. In the last few years, one of Zentiva′s main strategic directions from the production perspective was to consolidate its export activity, says the general manager. The company managed to grow exports from six per cent to 40 per cent of total production in 2014, from 64 to 120 products (from 60 SKU/pharmaceutical form to 280 SKU), from one export country (Republic of Moldova) to 17 countries all over Europe such as Germany, France, Spain, Italy and Portugal. Currently, Zentiva is making feasibility studies for exporting also outside the EU, planning to increase its export share.
"For the rest of 2015, we will continue to focus on accelerating exports," says Cocos. "Thanks to our team's expertise and cost-efficiency, the Bucharest plant is one of the first choices of Sanofi Group when it comes to transferring generic molecules for manufacturing. We will continue to invest in our production facility, but also in launching new products and in developing patient-oriented programs to better address Romanians' unmet needs. Regarding export activity, our plan is to reach up to 50 per cent of total production in over 20 countries, until 2018."

Zentiva Romania has 600 employees, with 400 working in production and 200 in the commercial area. Besides the Zentiva team, another 200 employees are working in Sanofi Group, providing a diversified portfolio of more than 350 products: innovative medicines, generics, consumer healthcare, vaccines and products dedicated to rare diseases.

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