"The relationship is soundly based on traditionally friendly ties"

Thanos Dendoulis, Ambassador for Greece to Romania

What is your first impression of Romania?

It is too early to speak about Romania since I have been here for almost a month and the weather so far did not help me to travel outside Bucharest. But, ever since I visited Bucharest for the first time, four years ago on an official visit, I was immediately impressed by the beauty of the city and the friendliness of the people. The longer I live here, the more that very first impression gradually turns to a conviction.

How your experiences in the past help inform you for this role?

As is the case in every foreign service, career diplomats with fairly long experience in international relations, acquire in years the ability to become quickly accustomed to new environments and fields of our job which largely helps in assuming new roles. It certainly helps a lot to have dealt with specific issues in the past. In my case, I consider a valuable experience my three year service in the NATO/Partnership for Peace Department of the Greek MFA, as well as the consecutive two year service in the United Nations Department.

What can Romania learn from your country as a current European Union member?

Every country has its own personality with its own particularities forged through the years by history, culture, education or mentality. It is difficult and maybe superfluous to try to appraise every country with the same criteria.
But since Romania with its Latin gene comes pretty close to the Mediterranean mentality, with its pros and cons, I will dare make a suggestion deriving from the experience that we, the Greeks had and the problems we had to counter. The EU, with all its deficiencies, is the necessary good for every European country. But it has its own rules of engagement and every member has to respect them, regardless of whether we like them all or not. To that end, it is imperative for the people to become disciplined and conscious of the great change that the accession entails. The soonest they comply with the rules, the sooner the progress will be tangible.

How do you think you could improve the bilateral relations between Romania and Greece?

The Greco-Romanian relations, be they in the political or the economic field, are at an excellent level, so the term 'improvement' may not be the appropriate one. I would prefer 'enhancement' of cooperation, which is after all the main axle of our relations.
In this respect I believe that we can always find new grounds for cooperation mainly in fields of common interest. Our greater geographical area is unfortunately still tormented by unrest. Joint initiatives may be undertaken towards appeasing long-standing tensions in the region and facilitating peaceful and viable solutions. It is most fortunate that both countries are currently non permanent members of the United Nations Security Council, the august political body of our modern society. This is a forum where cooperation between us both may be constructive and fruitful.
The business sector can be further expanded. The cultural field has a lot of potential, given the common heritage and the strong historical ties between our countries.

What is the difference in being Ambassador to Romania than to other places?

It is both challenging and appealing. For Greece and I believe likewise for Romania, Bucharest and Athens are important assignments from every aspect. I am certain that Romanian as well as Greek diplomats understand this very well. It is my conviction that back in Athens quite many colleagues would have liked to be in my place and be entrusted with this task.

What political questions do you think Romania still has to answer in order to be fit for accession?

I am not yet suitable to give you the right answer, less to give any advice. I am confident that the Romanian statesmen, currently or previously at the helm of your Administration, regardless of their political background have manifested repeatedly their common stance vis a vis the country's accession, as well as their will to fulfill the soonest possible prerequisites to that end.
Notwithstanding, judging from our Greek experience, I will repeat something I insinuated in one of my previous answers, that the most important challenge is to drastically change the mentality of the people and learn to smoothly and rapidly turn from the 'I' to the 'We'. After all it always takes two to tango.

What does your country offer Romania in business, education, military and culture? What does Romania offer back to your country?

Well, I could easily give you numbers or statistics. For example, statistics rank Greece 13th among the main investors in Romania with a capital of approximately 318 million USD. If we include Greek investment coming either from other countries or through offshore channels, the total invested capital reaches 2.4 billion USD, which corresponds to the 3rd place among the main investors, covering the whole range of goods, from services to heavy industry.
But this is not the issue. The bilateral relations between two countries with the background like ours are not accountable like commodities. The relationship is soundly based on traditionally friendly ties, long tested reliability, common values and mutual respect. You cannot reflect these elements on a balance sheet. Yet they are there, constantly paving the way for new synergies and enhanced cooperation.

What do you do in your daily job?

I can assure you nothing spectacular.
There is the every day routine work, meetings with the closest associates from the various departments of the Embassy. In this point I would like to mention that I consider myself extremely lucky to have an excellent staff at the Embassy, all outstandingly skilled and highly motivated.
Of course meetings with my colleagues and counterparts from the Administration are often in the every day agenda. What was your background?
I was born in February 1954 in Athens where I lived all the time.
My father was a newspaper-man, a genuine pragmatist, quite contrary to the artistic spirit of my painter mother, yet both in harmonious coexistence. I studied Economics in the Athens University and in 1976 I served the then 32 month compulsory military service in the Navy, as 2nd Lieutenant.
I joined the Diplomatic Service in 1979, participated in the UN fellowship on Disarmament in 1981, served in the Greek Delegation to the Council of Europe from 1984 to 1988, to the Greek Embassy in Tokyo from 1988 to 1990 and Consul General to Geneva from 1993 to 1997.

What leisure pursuits do you have in your spare time?

I like playing tennis, walking and listening to music, although since my arrival I haven't had much spare time. Nevertheless I managed already to enjoy twice your National Opera. Congratulations, you have excellent voices and a very high quality of performance.

What stores, galleries and restaurants are you looking forward to visit in Bucharest?

Everything that will ignite my cultural or culinary interest. I have already been impressed by the beautiful old buildings in Bucharest and I have also been informed of a fair number of interesting museums.

What books do you like to read? What is the latest important book you have read?

No specific preference. All kinds of books may be from the beginning interesting or dull. In the latter case they are placed unread back in the library. I must confess there are quite a few of that category.
The last one very interesting I read was a two volume essay about the successors (epigones) of Alexander the Great.

Will you be learning the Romanian language?

Well on that I was misinformed. I was told that it is an easy language, particularly if you speak French and Italian. I took some lessons before my departure from Greece but in vain, end of story. I wish I were much younger, when the aptitude of learning foreign languages is more accrued. Anyhow I believe that living here will help learning, if not properly, at least the every day language.

Ready to expand the range

Rising trade and a consolidation of business in Romania means Greece has a firm foothold locally, but there is more to be achieved in exploiting as-yet-untapped markets

Greek banks go for gradual growth

Having established a strong grip in the retail and commercial sectors, Greek banks seem to be growing, but cautiously

Georgios Michelis BancPost	Christos Giampanas Alpha Bank	Sofronis Strinopoulos Piraeus Bank	Sofianos Stylianos Egnatia Bank

The banking market may see some new players picking up the last state banks to be privatised, but Greek banks already register a presence locally, but now seem to favour organic growth rather than through any immediate acquisitions.
Six banks have arrived in Romania as the result of direct Greek investments, Alpha Bank, Bancpost, Egnatia Bank, Emporiki Bank, the National Bank of Greece and Piraeus Bank.
Five per cent is the largest registered market share of a Greek bank in Romania in terms of total assets, which is namely Bancpost. The bank's profits for 2004 have more than doubled on the previous year, says Georgios Michelis, CEO of the financial institution.
The bank's retail activity is expected to expand during the next few years, says the CEO.
Michelis does not see new players coming onto the market, except for those who will be looking for the opportunity of buying into the country's privatisations of its two massive state-owned institutions CEC and BCR.
Alpha Bank has an organic growth expansion plan for the next three years, starting this year, that will exceed 30 million Euro, says Christos Giampanas, executive president of the financial institution. By the end of 2007 its strategy is to achieve 50 branches in Romania, compared to only 19 at the end of 2004. The plan for this year includes opening ten new branches primarily in the wider Bucharest area, says Giampanas.
Alpha Bank has not expressed interest in the acquisition of Romanian Savings Bank nor in the Romanian Commercial Bank, because its strategy is to grow organically, explains the executive president.
“Another important plan for 2005 is also the change of the IT system, followed by a new head office building, and investments in the human resources area,” says Giampanas. The president says the bank will soon introduce an advanced Internet banking software programme.
The retail banking sector is believed to bring more revenue this year in terms of profitability, and not total income, adds the executive president.
“In terms of total assets, I estimate that Alpha Bank's registered a 3.5 per cent market share until December 2004, since official figures have not yet been disclosed by the National Bank Romania,” says the bank president.
“Turnover does not make a lot of sense for banks, so the main magnitudes which make sense for a bank and that actually increased between 35- 50 per cent in 2004 are that total assets last year were around 730 million Euro, loans around 500 million Euro and there were 340 million Euro worth of deposits,” reveals the president. The consumer lending business also saw a good increase in 2004, according to the bank.
The reason for the growth includes the bank's policy for interest rates and trying to keep competitive, especially where deposits were concerned.
As for the ROL denomination process, due on 1 July 2005, Giampanas believes there will not be a delay.
A growth rate of ten times in the last four years is remarkable in any market and especially in a competitive one such as banking. This performance was reached by Piraeus Bank Romania, which is now approaching the level of 300 million Euro in total assets and a market share close to two per cent.
“Piraeus Bank plans to become, in the near future, one of the five to seven large banks in Romania, from current 12th position,” says managing director Sofronis Strinopoulos.
Last year the bank started the implementation of a fast development plan for its retail activities which will soon see the expansion of the branch network to 21 by the end of the first quarter of this year, 30 operational branches by December 2005 and 50 to 55 by 2006.
The Romanian banking market is very fragmented presently with more than 20 banks with a size of less than 250 million Euro and only two banks with a market share more than ten per cent. A number of large foreign banks which are active in the region still do not have presence in Romania are looking to enter Romania.
“In the coming years we should see a number of mergers and acquisitions as well as new entrants in the market,” says Strinopoulos. “Financial giants have expressed their interest in the Romanian banking sector. Eventually, the Romanian banking market will stabilise at five to seven large banks, another seven to eight medium size banks and some small, niche banks.
Piraeus Bank sees itself as one of the big players in the market, seriously considering any opportunities for acquisition.”
“The introduction of the 'Heavy Leu' is a very significant step in the road of integration of Romania in the EU,” he adds. “It is important that the July deadline is kept. However, the bank depends on decisions, regulations and guidelines from the authorities.”
Another important necessity is the restructuring of the state-controlled economy, argues the bank boss.
“Privatization is one way but not the only one. Subsidies and debt forgiveness as well as exclusivity in obtaining state generated business are important areas of improvement. These problems still persist in the Romanian economy and they distort the competitive conditions in the sense that state-controlled companies enjoy preferential treatment and as a result have an unfair competitive advantage over privately held companies.”
The byword for Egnatia Bank was 'careful' when they decided to invest in Romania, as the local market had been viewed as one of a very high potential. In December 2000, BNP - Dresdner Bank (Romania) was bought by Egnatia Bank S.A. (Greece).
“At the time Egnatia Bank decided that the internationalisation momentum had come and Romania was a preferred choice,” says Stylianos Sofianos, general manager of the financial institution.
The total investment in Romania has exceeded 18.4 million USD and Egnatia currently holds 0.19 per cent of the Romanian banking market. Total assets in 2004 exceeded 52 million Euro and the Operational Profit at the end of 2004 was over 0.6 million Euro with estimations to double the figure in 2005.
The Greek bank operating in Romania has met some difficulties along the way, one of them being related to the legal environment that sees Romania as unstable, according to bank's management team. “However, in the last couple of years, the frequent changes have been beneficial as such changes brought a general stability to the market,” says Sofianos.
In advising possible future investors in Romania, Sofianos says “BE CAREFUL, despite the clear potential and the enthusiasm. The golden word should be CAREFUL: plan carefully, invest carefully, develop carefully and chose your partners carefully.”
Emporiki Bank Romania was officially opened in September 1999, initially under the name of Commercial Bank of Greece Romania (Emporiki means commercial in the Greek language). Setting up a branch in Romania is part of a wider plan of expanding in the Balkan and Black Sea regions.
It currently operates three branches in Bucharest and other two in Iasi and Constanta.
Emporiki Bank owns a share capital that exceeds 20 million Euro. The bank is currently going through management changes and could not give any information when we went to press.
Banca Romaneasca was set up in 1993 as a general commercial bank, with an entirely private share capital. Ten years later, in October 2003, the National Bank of Greece became the main shareholder of the bank, with a current share of 90.87 per cent in the institution. Figures from the National Bank of Greece show it has a market share of 1.7 per cent in terms of assets at the end of last year.

Can the date for ROL denomination be met?

The norms to define the ROL denomination have not yet made public by the Romanian National Bank by the time we went to the printing. Every banker interviewed by The Diplomat on whether the deadline of the first of July will be met for the introduction of RON were confident, but IT solutions provider, PayNet is not so sure.
“Personally, I would be very surprised if we can keep the date of 1 July,” says John Chrissoveloni, CEO of Paynet, one of the companies that will deal with the change in the information system.
“It is almost like the Olympic Games: I never believed Greece would be able to run them, but they proved me wrong. We have only four months to develop the system, test it, try to run a pilot on it, so by 1 July it can become operational - and I think four months is not enough to do all this. If nothing happens by the end of February [when BNR aim to announce the norms], I think we should basically forget about this date" says Chrissoveloni.
“The new IT system for the denomination is very complex, because you have to deal with balances of accounts, the value of transactions, historical data and this is not just about one point in time when you can simply cut four zeros and turn out the RON.”
So you have two accounts: an old one and a new one, running parallel.
“You have a balance of account,” says Chrissoveloni, “you divide it by 10,000 and now you have a different rounding, a different figure for what you had before; who takes this cost the client, the bank or the state? The cost is taken by the population at large.”
Paynet has two providers of licenses that have already dealt with denomination in different countries at different times in Russia, Bulgaria and Greece.
Since the boom in consumer credit, Paynet, through its parent company in Greece Informer group, has already introduced on the Romanian market a time-saving product that allows customers to be granted a credit called Consumer Credit at Merchant, a system that operates through the Internet, with retail and Internet banking technology.

Hearing the call of the market

Greeks have seized upon the growing telecom sector in Romania, investing end-to-end in production, services and distribution

Telecommunications is a sector that has grown massively in developing countries. Romania is no exception and, over the last decade, Greek firms have tried to capitalise in this field.
OTE International Investments holds a 54.01 per cent interest in RomTelecom, the largest fixed telephone operator in Romania. This, the largest Greek investment in Romania so far, is worth over 760 million Euro. The replacement of old technologies that cannot support today's demands for services such as high speed Internet access, video on demand and data applications, is the main focus of this year's stategy.
RomTelecom's management is moving ahead with continued implementation of its ‘Transformation Plan’ one of the most important of which is the implementation of a new central billing system replacing 20 existing systems, and the opening of a Directory Assistance call center, decreasing the cost per call by 25 per cent.
In the first nine months of 2004, RomTelecom posted revenues of 618 million Euro, up five per cent from the same period last year although this was affected by the devaluation of the ROL (8.9 million Euro were thus lost in the third quarter of 2004).
RomTelecom and Internet services provider ARTelecom took the decicion to merge in November last year, and became operational on 1 February, when ARtelecom was erased from the Trade Registry. The merger did not affect RomTelecom's equity and all ARtelecom's employees were transfered to RomTelecom. According to recent Omnibus research, ARtelecom is the third player on the market in regard to customer awareness.
The troubled mobile phone operator held by OTE, CosmoRom, has operating revenues for the three months ending 30 September 2004 amounting to 1.6 million Euro, while its net loss amounted to 6.2 million Euro. A proposal to re-launch the Romanian mobile operations under the management of Greek mobile operator Cosmote has been submitted to the Romanian Government in its capacity as joint-shareholder of RomTelecom. Also, a report was made by American financial institution Citigroup, into future strategy options for CosmoRom in June last year, and a decision is expected to be taken soon by OTE, RomTelecom and the Romanian Government.
In the third quarter of 2004, the number of CosmoRom mobile telephone contract customers shows a drop by almost 13 per cent, while the number of prepaid customers increased by some 15 per cent.
Greek-owned mobile phone and accessory retailer Germanos has chosen to focus on expanding markets in Eastern Europe, with Romania the country of choice for investing more than 15 million Euro. Besides the shops, Germanos has developed a large distribution network for disposable and rechargeable batteries and phone cards. For the pre-pay segment, Germanos covers over a fifth of the market, while the contract customers cover a quarter of the market share.
“The Romanian business environment has not caused difficulties for us, except one,” says the Germanos' general manager Nikos Kakoulidis, “that is the existence of the black market in mobile phones. One solution for this problem could be banning the sale and import of mobiles that are not new.”
To improve the business environment in Romania, the general manager argues for the perseverance and application of existing laws. “If Romania continues in the same rhythm towards the European Union, no other supplementary laws will be necessary except the European ones,” he says. Germanos registered 52 million Euros in turnover last year in Romania and expects a 30 to 35 per cent increase in 2005.
In the software provision business, Intrarom has seen the most opportunities in e-Government and e-administration.
The firm, part of Greek mother company Intracom, offers software development made to fit customer demands and local telecom equipment production, such as wires and telephones. Since 1993 the firm has invested 40 million Euro in Romania and now employs 550 people. In 2004 the turnover is estimated at 55 million Euro, an 18 per cent increase compared on the 2003 figure.
The IT&C firm has made integrated IT System deals in public administration with Bucharest City Hall, which is in the final stage of completion, and incoming director general Nikos Doukakis says: “Next year the Government sector is likely to spend a lot of money to modernise itself to meet EU standards.”
Recently Intrarom won a contract to supply a software program to the Ministry of Finance to monitor how the Phare funds are absorbed. The firm will modernise its operations this year, including bringing in BGA components and meeting European standards by going 'lead free' in its production in an investment probably below one million Euro. “It is mandatory to invest in technology,” says Doukakis of this field.

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Bringing out the local flavour

Making business in a developing country is often about taking an established success story from a mature market and being the pioneer in the new nation, but also knowing exactly the right time to invest, build and supply the products to market

Ten out of the top 25 Greek investors are major players on the Food and Beverage industry. With a combined investment of over half a billion Euro, the Greek production in edible FMCGs is the most successful sector.
Following in the footsteps of Dorna Mineral Water selling out to Coca Cola, was the sale in November 2004 of Greek company Star Foods to rival beverage giant Pepsi Co. These examples of successful Greek brands building up the company before selling out to a large multinational are just the beginning. As Romania opens up, further mergers and acquisitions will happen.
Milling, baking and cereal product manufacturer Loulis Group always intended to invest in the Balkans, “Since this is the biggest market in the region with a great potential,” says president Nikos Voudouris. Romania is the only country where the company expanded its portfolio of products, diversifying its activity in several different food sectors based on cereal crops.
“The reason for our investing here is that Romanians are very big consumers of milling and baking products,” adds Voudouris. The business is currently supported by an 80 million Euro investment in factories in Bucharest and Targu Mures. There are some 1,000 people working for the company.
Consolidated results show 50.2 million Euro in last year's turnover, with an eight per cent profit. The company's major target for 2005 is to build awareness of its brands and its corporate image, in parallel with improving logistics operations, since capital investment has been concluded.
The Romanian market is seen by Greek businessman as in transition, but promising and developing fast. His advice for possible foreign investors is get in quick: “Come as fast as possible to invest, because this is the right time; since the market has not yet stabilised, there is room for new entries.”
Soft drinks giant Coca-Cola entered the Romanian market shortly after the fall of communism and, in 1991, was one of the first major investors in the Romanian economy.
Coca Cola and its bottler, Coca-Cola Hellenic Bottling Company(CCHBC), has invested up to 400 million Euro in the last 14 years, and is the second largest Greek investment in Romania. “2004 was a generous year, and we managed to sell over 100 million bottle crates,” says Calin Dragan, general manager of Coca-Cola HBC Romania.
Alexandrion Grup, a company mainly known as an alcoholic beverage manufacturer is now aggresivly expanding into new areas of business, according to Nawaf Salameh, President of the group, such as agriculture, cereal production and in construction materials. The firm also manufactures toilet paper in the company's factory in Boldesti Scaieni and its next phase of development will be to transform this into a national recycling center for paper and PET.
FMCG distributor Elgeka Ferfelis has invested in Romania a total of 12 million Euro and registered approximately 30 million Euro in turnover in 2004, while the profit before taxes ranged at 800,000 Euro.
For this year, the company management team expects to increase its turnover by over 25 per cent, relying on the new cooperation contract signed at the beginning of January with multinational Reckitt Benckiser.
Some of the problems faced along the way by the Greek company include the lack of coordination and cooperation among state institutes, unfair competition, the underground economy (23 per cent of GDP), the lack of transparency in the privatization process and bureaucracy, according to Yannis Ferfelis, president and CEO of Elgeka Ferfelis Romania.
Packaging producer MJ Maillis Romania's turnover registered an increase by 20 per cent last year with an 0.8 million Euro profit after tax, around a 70 per cent increase on 2003. “A significant percentage of this growth is due to machinery sales,” Stratis Molinos, country manager of MJ Maillis Romania told The Diplomat. The increase was also possible through the entire group's ability to purchase raw materials internationally in bulk, which provided significant benefits against local competitors and producers.
For 2005, the Romanian subsidiary is expected to see an almost 35 per cent turnover increase and profit before tax to reach 15 per cent of sales, according to the country manager. This is partway due to new technology in production, which will add some three to four million Euro to the turnover.
The most important plan for this year is related to the free float on the BSE of the company's shares that will be increased in the near future, from the current eight per cent listed. The announcement will be made by the end of the first semester of 2005. The decision to increase the free float on the BSE was also taken after repeated calls from foreign and Romanian businessmen interested in investing in MJ Maillis Romania shares, says the firm.
“All the money that will be gained through the free float of shares at the BSE we intend to invest, the same strategy we used in Greece in 1999, when we gained a lot of money on the stock exchange, which we invested in other companies from Italy and Canada,” adds Molinos. MJ Maillis was also the first foreign company to be listed on the BSE, according to the country manager. “The expansion of our factory by 2,500 sqm will double its size and be finalised by the end of March 2005, followed by investment in machinery and the manufacture of new products. The investment in the building will increase by up to 500,000 Euro,” says Molinos. Other plans include a potential increase in production capacity and also cooperation with large logistics companies.
Producer of cleaning products Interstar Chim's strategy for the next period is to concentrate on niche markets, by aiming to offer products that respond to specific needs of consumers, since the firm has powerful competitors in multinational companies, which invest a lot in supporting their products on the market.
Ten per cent of the Romanian production is destined to exports. Last year the company turnover registered a 17 per cent increase on 2003, reaching 12.5 million USD and expects 20 per cent growth this year. In 2004 Interstar Chim invested some one million dollars for the construction of a new 3,500 sqm warehouse in Bucharest, and investments will be continued for warehouses in the country, that will reach around 300,000 Euro. In addition to that, other investments are going on for another production unit in Ukraine, which is part of the company's plan to expand more into this market.
The company has invested in Romania over five million Euro and owns a 7,000 sqm production area, where most of the products are being manufactured. Where distribution is concerned, there are also two warehouses on different sides of the country, in Cluj and Bacau, while the distribution network covers around 10,000 stores all over Romania. Interstar Chim is also present in countries like Bulgaria, Ukraine, Russia, Moldova and Macedonia.
The distribution market in Romania is characterised by instability, a fact that helps to eliminate small retailers in the market. But the disappearance of small stores can be both advantageous, allowing big companies that enter the market, and disadvantageous, by making the process of recuperating debts harder, argues Ferfelis.
Panayiotis Vassos, general manager of Xpress Printing, has anticipated the demand for direct mailing and personalised digital printing. Following a 600,000 Euro investment, he has bought one of the most advanced digital printing machines in eastern Europe.
"Research shows that the direct mailing response in case of a personalised message is ten or even twenty times higher than when you send a message starting with 'Dear Client',” says Vassos. The new technology simply allows printing documents that contain different information, depending on the clients' background, power of purchase and quality of life.
XPress Printing has planned an expansion strategy that will eventually aim to cover the country. The turnover registered in 2004 reached 2.5 million Euro and the firm expects 60 per cent increase for this year. As for the foreign investors interested in opening business in Romania, the general manager from XPress Printing has some advice: “Do not underestimate Romanians, better yet respect them.”