Business - Greece Focus
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.
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.
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.
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.
What do you do in your daily job?
I can assure you nothing spectacular.
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.
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.
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
Bilateral trade figures for the first 11 months of 2004 that show a 40 per cent increase on the previous year and 973 million USD should be a cause to celebrate, should it not?
“I honestly admit that I am not happy with the figure, because I can see more potential,” says Lambis Kounalakis, Counsellor for the Economic and Commercial Affairs of the Greek Embassy who, during his previous assignment in Turkey, oversaw a rise in the volume of bilateral trade multiplied by nine.
Greek investments in Romania have witnessed a substantial increase, especially in the last four years, according to Kounalakis.
Greece ranks 12th among foreign investors with over 2,800 companies in Romania, a value of 2.75 per cent of the total FDI. Estimations of the Economic Office from the Greek Embassy show that only 20 per cent of these companies are active. But the official figures do not include capital transfers through Cyprus, Luxembourg, Ireland and Holland. Unofficial estimations see around 6,000 to 7,000 Greek companies, with a ranking of third place in terms of foreign investments in Romania.
The Greek companies are present in different economic sectors, from banking, telecommunications, consultancy and finance, construction, food and beverages, shipping, textiles, information technology, insurance, packaging, plastics, pharmaceuticals and cosmetics.
From the point of view of total invested capital, 58 per cent represent telecom-munications, 18 per cent food and beverages, eight per cent manufacturing industry, six per cent banking sector, three per cent distribution channels and one per cent constructions.
The largest share of outward Greek investment in the Balkans has gone to Romania, followed by Yugoslavia and Bulgaria.
But it is not a completely rosy picture.
There are a long list of problems that Greek investors face in the country including a lack of transparency in the privatisation process, unfair competition, violations of the patents law, difficulties in tariffs, property rights on lands only for foreigners and not natural persons, complex procedures in creating a company, a lack of co-ordination among government agencies, an immature stock exchange market, problems in enforcing court decisions and delays in VAT returns.
Export figures for the two countries have increased, but the trade deficit favours Romania, with a difference close to 200 million USD.
In 2004, Greece was tenth among Romania's clients, and 19th among its suppliers.
The range of Greek products imported by Romania is limited, and 83 per cent of them are made up of only five categories, metals, telecommunications equipment, plastics, processed food and mineral ores.
Metal ores are believed to be responsible for the trade deficit between the two countries, which, in the opinion of Kounalakis, is of a temporary nature.
The economic counsellor considers Romania has very good dynamics, especially as it will become a future member state of the European Union.
“Due to globalisation, Greek companies had to choose their direction, and of course, Romania, as well as Bulgaria, became great hosts for their investments,” says Kounalakis.
Some other Greek companies are currently investigating the market, so that they can invest here, in sectors that have so far remained unexploited, such as chemistry, tourism and the shipping industry, reveals Kounalakis.
“The privatisation of the two largest banks, the Romanian Savings Bank (CEC) and the Commercial Bank (BCR), are closely watched by Greek financial institutions. Also, the EU's SAPARD program, granted to Romania, is an important and appealing reason for Hellenic businessmen to invest in the country,” adds the counsellor.
The first grand project of the newly appointed diplomat includes organising two-day business events in nine counties this year and eventually all over the country in the future.
The events will emphasise to Greek businessmen the regions for investment opportunities and will also benefit from the support of regional Chambers of Commerce. The same operation will happen with Romanian businessmen, who will be invited to similar events in Greece.
Having established a strong grip in the retail and commercial sectors, Greek banks seem to be growing, but cautiously
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.
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.
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.
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.”