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May - 2005

Economic News


State moves to assist Rafo Onesti

Troubled oil refinery Rafo Onesti, which is almost 9,000 billion lei (250 million Euro) in debt to the state, will return into the ownership of the Government's privatisation authority AVAS. RAFO's shareholders approved the conversion of some of its shares into debts to the state, but with an increase in the capital share of the company, thus cancelling the massive deficits. This seems to be in contradiction to Basescu's intentions to prosecute firms in debt to the Government. “We will not be prepared to tolerate any more non-payments to the state budget,” Basescu told The Diplomat last November. “If they don't pay because the manager does not have the habit or the pleasure to pay to the state, the manager will go to jail.” For now the refinery is owned 99 per cent by the UK-registered firm Balkan Petroleum. In this new deal, Balkan Petroleum will own 17.35 per cent, ministry of finance 35.4 per cent, Faber invest and trade 21.99 per cent, Petrom 9.92 per cent, VGB oil 6.65 per cent, Tender SA 1.72 per cent and Iasi district agency 4.18 per cent.

Ministry toughens up on debtors

Ministry of Finance intends to bankrupt 4,200 firms which have a sum of almost one billion Euro (33,000 billion lei) in debts to the state. In addition, these firms, of which 58 are large companies, owe a further 3,351 billion lei in unpaid taxes, income taxes, penalties and social contributions.

Connex is first to launch 3G

Joint-largest local mobile phone firm Connex launched its third generation (3G) services last month in a total investment estimated at 700 million USD. Video, data transfer and a fast mobile Internet are now available through the firm, which is completing sales talks with British group Vodafone. 3G only has limited availability at present, in Bucharest, Cluj, Timisoara, Brasov, Iasi, Constanta, Craiova and Ploiesti and on the Bucharest-Brasov motorway, and international video calling between Austria, Germany, France, Italy, Portugal and Switzerland.

Bancpost throws in the hat for CEC

Greek-owned Bancpost will participate in the national savings bank CEC privatisation through its mother company EFG Eurobank Ergasias, Georgios Michelis, CEO of Bancpost confirmed to The Diplomat. Austrian Erste Bank and Raiffeisen Bank, Hungarian OTP Bank and Dutch Rabobank are also expected to bid for CEC. Last month the Greek-owned Bancpost appointed a new president, former vice-governer of the National Bank Mihai Bogza, who replaced retiring Elena Petculescu. Meanwhile the Government hopes that the largest Romanian bank, BCR will be privatised before CEC.

Bulgaria does business better

The attractiveness of Romania’s business environment over the next four years is still worse than Bulgaria’s, according to a survey of 60 countries by the Economist Intelligence Unit (EIU). Romania is in 38th place, eight places higher than the last survey, behind Bulgaria (36), Slovakia (30), Poland (29) and Hungary (25). The first place is occupied by Denmark.


Capital releases public bus tender

Bucharest’s Transport Company (RATB) will open a tender in the next few months to purchase 500 new buses for the capital’s geriatric transport network. RATB will buy the buses over two years and the cost of the project is estimated to be around 4,000 billion lei (110 million Euro). From the already existing 1,150 buses, around half are in a state of chronic disrepair and 550 have surpassed their lifespan twice over. According to RATB, Bucharest buses travel with an eight-person per square meter average, double the European norm.


BCR scores massive loan

Romania’s largest bank Banca Comerciala Romana (BCR) has attracted a record-breaking 400 million USD loan from other banks without any governmental guaranties. The bank obtained the credit at a fairly good cost over a five year period, with a four-year guarantee period. It was arranged by Bank Austria Creditanstalt, Calyon (Credit Agricole’s corporate and investment bank) Citibank and WestLB AG’s London office.The state-owned bank has a deadline of 18 months to privatise, but is attracting less enthusiastic suitors than the national savings bank CEC.


Wal-mart unlikely to launch on local market

Following press speculation, Wal-Mart is probably not going to enter the Romanian market. “At this time Wal-Mart does not have any plans to open in Romania,” Beth Keck, Director Wal-Mart International Corporate Affairs told The Diplomat. Retail analyst at UK research firm Mintel Richard Perks added: “I don't think the company has the humility to succeed in different markets. Its German venture has been loss making from the start and I suspect that its German experience may have put it off further expansion in Continental Europe.” British retailer Tesco has also been the subject of ongoing press speculation as to whether it will enter the local market, as it has a strong presence in Hungary. Analysts agree that it will focus on hypermarkets and could successfully adapt its format to Romania, but may be reluctant to enter the market due to the strong presence of competitors such as Cora and Carrefour.


Getting closer to Dusseldorf

Lufthansa is introducing a new direct flight to Germany on the route Bucharest to Dusseldorf, six times per week, starting on 2 May. The flight will take off from the Henri Coanda (Otopeni) at 13.25 hrs, and from Dusseldorf at 9.15 hrs and will have 50 places.

State electrical engine firm to split into four to secure an easy sale

After failing to sell the whole firm to a strategic investor, the Government could split state electrical engine manufacturer Electroputere into four parts to make the privatisation more attractive. The divisions at present include locomotives, electric engines, transformers and miscellaneous electrical equipment. It must all be sold as part of an agreement with the International Monetary Fund. Several companies have showed an interest in buying parts of Electroputere, according to Prime Minister Tariceanu, such as Germany's Siemens in the locomotive division.

New ferry link to Bulgaria due

Last month Bulgaria started the construction of a ferryboat terminal at the Danube port of Nikopol to link with Romania’s Turnu Magurele on the opposite bank. The new ferry line is expected to be operational by July next year. The EU Phare financial aid program is funding this with 3.4 million Euro, while Bulgaria’s government is co-financing the project with 1.5 million Euro.

IT firm picks up local company

Global provider for IT solutions and services Ness Technologies has bought out Radix Company SA, a private Romanian provider of IT services, for four million Euro. Should Radix perform well over the next two years, Ness Tech says it will pay up to three million Euro more, according to company statements. In 2004, Radix generated revenues of 12 million USD and said it posted profit. Radix currently has strong partnerships with SAP and Microsoft.


BNP Paribas credit firm buys up local leader

BNP Paribas consumer credit subsidiary Cetelem has bought out domestic credit firm Credisson for an undisclosed sum from Swedish investors Oresa Ventures and Florin Andronescu, the firm's president, who will retain his senior role. The French giant intends to accelerate the development of this consumer credit business, with Credisson currently employing 663 staff and incrementing sales of 210 million Euro.

Nation goes dark on cinemas

Rising taxes, the growth of piracy and a falling audience have meant 124 cinemas have been shut down in the last four years. This looks set to worsen as the Government introduces a 19 per cent VAT on tickets which will mean, from 1 June, the cheapest tickets cost around 75,000 lei (2.3 Euro). In city centre theatres only 25 to 50 per cent of the seats are occupied, while cinemas on the outskirts of towns see even fewer visitors. A failure to gain quick returns also delays the distribution of blockbusters, which then forces audiences to seek out pirate copies of the latest releases.

Former shoe giant reopens

State-owned shoe factory Clujana, formerly the largest footwear manufacturer in south-east Europe, will restart production this month. Closed since 1999, the firm, which is majority-owned by the Cluj-Napoca district council, has signed two lohn contracts with Romanian and Italian companies to deliver 18,000 shoe uppers monthly.