May
2008
ECONOMIC NEWS
 
Vol. 4 No.4  
 

Esplanada project to become private-public partnership

 
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Hungarian real estate developer TriGranit will start the works on the city-centre Esplanada project in the second half of 2009, following the Government approval of a private-public partnership.
The Bucharest project is planned for a wasteland bordered by Unirii Boulevard and Strada Nerva Traian, stretching over 107,140 sqm on the banks of the Dambovita.
In 2005, when the project was first announced, the investment plan was for one billion Euro. Since then the project has suffered delays due to contested land ownership of the site and now the investment figure is expected to be two to three billion Euro.
The mixed-use project will include stores, offices and leisure. The first phase of the project will provide local authorities with a cultural building worth 40 million Euro, office spaces for state institutions covering 12,000 sqm and underground public parking spaces.
The entire project will become the property of the state after a 49 year-partnership, at the end of which Trigranit will have the option to buy the complex.


Romania: best regional investment destination

Romania is the most attractive investment destination in southeast Europe this year, followed by Turkey, Bulgaria and Greece, according to a report by Ernst & Young.
Although Romania ranks first in terms of foreign direct investment between 2006 and 2007, Serbia registered the most dynamic growth in the same period, with a 174 per cent increase.
According to another survey conducted by Germany’s Centre for European Economic Research, 37 percent of foreign investors polled consider Romania the most attractive site in eastern Europe, ahead of Poland at 34 per cent and the Czech Republic and Hungary at six per cent each.
However FDI is expected to stabilise at seven billion Euro this year, about the same as last year, according to the National Agency for Foreign Investments (ARIS). The figure represents nearly 20 per cent of the total FDI in the ten new EU member states, which totalled 39.3 billion Euro last year.


Irish energy group set to exploit oil fields

Irish company Blackstairs Energy has entered the Romanian market after winning auctions to exploit seven oil fields, previously owned by power producers Petrom and Romgaz.
The auctions were organised by the National Agency for Mineral Resources (ANRM) for a total of 15 oil perimeters. The concession rights for the other eight oil perimeters were obtained by Fora Energy (Cyprus), Expert Petroleum (Jordan), Sigma Energy Craiova, Foraj Sonde Craiova and Brent Oil.
The Romanian National Agency for Mineral Resources will put up for sale another 11 such fields this autumn.


Mega Image consolidates urban supermarket operations

Belgian international food retailer Delhaize Group has acquired urban retailer La Fourmi, which operates 14 supermarkets in Bucharest, through its fully-owned subsidiary Mega Image.
This move will put the pressure on Carrefour, which has also expanded its supermarket operations with the purchase of the Artima supermarket chain last year and opened a large city centre store behind Unirea Shopping Centre, Bucharest.
“We expect sizable sales opportunities and buying synergies from this acquisition,” said John Kyritsis, general manager of Mega Image
The deal is priced at 18.6 million Euro, subject to contractual adjustments and includes the ownership of four stores.
La Fourmi is regarded as the first proper supermarket chain to open in Bucharest, in 1992, and revenues for 2007 are estimated at 30 million Euro. The 14 stores, which have a size of 350 to 500 square metres, will be converted into Mega Image.
The transaction, which requires Competition Council approval, is expected to close in the second quarter of 2008.


Romanians touring abroad to rise

Numbers of Romanians visiting their own country will register a 15 per centincrease in 2008, while 25 per cent more of the country’s citizens will travel abroad this year, according to the National Association of Tourism Agencies (ANAT).
The Black Sea coast, rural guest houses and mountain resorts are among the most requested internal destinations.
The top foreign destinations this year for Romanians are Greece, Bulgaria, Turkey, Tunisia, Egypt, Tunisia, Austria, Israel, Portugal, Slovenia, Ukraine and the Republic of Moldova.


Goin’ down to South Park

Romanian developer Premier Business Group has just launched a 25 million Euro residential project, 30 kilometres from Bucharest, in Vasilati village, Calarasi county, called ‘South Park’.
This will consist of nine blocks of flats, 15 individual villas and ten duplex villas, Carmen Furmuzache, marketing director at Premier Business told The Diplomat. It will also include a shopping centre, swimming pool, supermarket, kindergarten and a park. The project, positioned near a lake and forest, will stretch over 65,000 sqm and will be delivered in three phases by 2010.


French insurer continues buying spree

Insurance firm Groupama has bought the third largest Romanian insurer Asiban from four Romanian-based banks for 350 million Euro.
Austrian Banca Comerciala Romana (BCR), French BRD - Group Societe Generale, Romanian Banca Transilvania and state-owned savings bank CEC each held a 25 per cent stake in Asiban, which has an eight per cent market share of the composite insurance market.
Groupama has already purchased insurance firms BT Asigurari and OTP Garancia Asigurari in the last six months.
With the acquisition of Asiban, Groupama will reach a total of 13 per cent on the Romanian insurance market, competing with Vienna Insurance Group which has a market share of 37 per cent and Allianz, which holds 17 per cent of the market.


Short stories

Next year launch for Ownership Fund

After four years of inaction, the Ownership Fund (Fondul Proprietatea) plans to go live on the Bucharest Stock Exchange in July 2009. Fondul Proprietatea was created in 2005 to compensate former owners of property who were dispossessed during Communism with shares in state companies. The fund has a share capital of around four billion Euro. The task book for the auction for the administrator of the fund will be launched this August.

US-Greek group wins gas power plant tender for Petrom

US giant General Electric and Greek constructor of thermopower plants Metka will build a 400 million Euro gas-fired power plant in Brazi, Prahova county for Austrian-owned oil and gas group Petrom. The plant is due for delivery in September 2011. The tender also included ATEC, Alstom and Siemens.

Swedes buy up local outsourcer

Swedish provider of network software and services Enea has acquired Romanian provider of IT outsourcing services IP Devel for 3.2 million Euro. Set up in 2000, IP Devel is specialised in embedded systems development and advanced test services. Enea has been, since 2006, one of IP Devel’s largest customers.

East-west Romanian wage divide prompts relocation

Clothing manufacturer Teba Industries group has decided to close down its plant in Arad and move operations to Iasi by this August, due to the shortage of workforce and rising salaries in western Romania. Over 900 employees at the Arad-based plant, which manufactures children’s clothing, will be affected by the relocation. “The company has offered the employees the opportunity to relocate to Iasi, but very few accepted,” Laura Madosa, general manager of Teba Industries told Ziarul Financiar.

French continue dairy purchases

French group Lactalis has taken over the Romanian-based group LaDorna, controlled by businessman Jean Valvis. The deal is estimated at almost 100 million Euro. LaDorna is the third-largest domestic dairy producer after Dutch Friesland and French Danone, while Lactalis is the second-largest international dairy player. LaDorna has around 1,200 employees in eight production facilities and registered a 40 million Euro turnover last year. Meanwhile Dutch dairy producers and suppliers, both of which are present in Romania, Friesland Foods and Campina, will merge into a new dairy company.

DHL buys up local express courier group

German express and logistics company DHL has acquired domestic express courier Cargus. The two companies will continue to act as separate entities and will keep their employees, brand and the type of services offered. Current DHL Romania general manager Gian Sharp will lead the new joint management team, while Augustin Plesea, president of Cargus, will keep his position in the Cargus management board.

Strike over wages at car plant ends

Renault-owned car producer Dacia has reached an agreement with the factory’s union workers after a three-week strike, which included the suspension of production of 23,000 Dacia Logans. The company would not disclose the volume of losses caused by the strike, but estimates in the Romanian and French press amount to around 130 million Euro. Under the new agreement, qualified workers will receive an increase of 83 Euro per month starting retroactively from 1 January 2008, and another 18 Euro starting on 1 September 2008. Union leader Nicolae Pavelescu said that 70 per cent of the workers agreed to this proposition. According to a release by Dacia Renault, all the employees have engaged in meeting the car plant’s objectives for 2008.

Second Danube bridge begins construction

Construction on the second bridge over Danube between Romania and Bulgaria has finally started, eight years since the agreement between the two countries was signed. Spanish construction company FCC Construcciones won the auction to build the two-kilometre Bridge between Vidin in Bulgaria and Calafat in Romania for a delivery date of 2010. Part of pan-European transport Corridor number IV, the bridge will have four lanes for road transportation and a railway. The maximum speed for trains will be 160 km per hour and 100 km per hour for vehicles.

New German-Dutch cargo venture banks on far east-Romania trade

New German-Dutch venture IBCargo has begun operations as an ocean and air freight consolidator, domestic distribiution and trucking with branches in Bucharest, Constanta and Timisoara, with a focus on far east trade. “We have become the leading ocean freight consolidator for cargo from the Far East and China to Romania via Constanta after barely eight weeks of operation,” director of IBCargo Kees Cramer told The Diplomat. The company expects to expand its warehouse surface in Romania to 10,000 sqm by the end of 2008, when it will open three more branches. IBCargo is focused on Romania, but plans to expand regionally after 2008, added Cramer.

Small stores go bust under pressure from big league

Bankruptcies in Romania have increased by over one third in 2007 compared to the previous year, according to a report by risk analysts Coface Romania. Small retailers have found it hard to compete with international large format stores’ expansion in Romania, with retail accounting for 41.4 per cent of 13,104 firms going bust in 2007. This was followed by companies active in agriculture and the food industry. Construction companies are placed fourth in the list of bankrupt sectors, despite the massive growth in Romania’s construction industry. Reasons for this include the lack of workforce and, consequently, the rising wage demands of qualified builders, which have affected small and medium sized firms.

GDP set to rise by 6.5 per cent

Romania’s gross domestic product will witness an increase of 6.5 per cent on its total for 2007 and is expected to reach 133.8 billion Euro this year, according to a report by the National Prognosis Commission (CNP). The same report sees a fall in the size of growth to 5.8 per cent in 2010, where it believes the rate will remain stable for three years. Trade deficit will rise to 18.2 per cent of GDP in 2008 at 24.3 billion Euro against 17.8 per cent of GDP in 2007, argues the CNP report. The Romanian people’s wages are also estimated to increase in 2008 by 13.2 per cent on the previous year to 426 Euro per month.


 
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