May
2008
COUNTRY FOCUS - ISRAEL
 
Vol. 4 No.4  
 

Israel capitalises on hi-tech sector


Hi-tech may be a future link for Israeli-Romanian business in the future, says new Ambassador of Israel to Romania, Oren David
Oren david
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Hi-tech is a sector where Israeli Ambassador to Bucharest Oren David is proud of his country’s development, which is now bringing knowledge to Romania through companies investing in the new EU country.
This includes wireless broadband pioneer Alvarion, active in Romania since 2000, when it opened the second-largest production facility after Israel, with the hiring of over 200 Romanian engineers.
Currently Israeli investments in Romania are focused on real estate, but the Ambassador says that Israeli interest in Romania will concentrate in other sectors such as the food industry, clothing, hospitality and hi-tech.
“Israelis are very innovative and offer high quality products and services and I already see in Bucharest as well as outside the Capital an increasing trend towards quality in general,” he says. “The number of Romanians that have living standards like in the West is growing very fast.”
High street fashion stores such as Kenvelo, which in Hebrew means ‘Yes and No’, have registered success in Romania. Many other Israeli brands are present on the Romanian market without customers being aware of their country of origin. New mall projects are also under development by Israeli companies.
This year the State of Israel is celebrating its 60th anniversary. In the last two decades, around 350,000 Jews left Romania for Israel and now the Jewish community of Romanian origin in Israel is the fourth-largest immigrant group in the country. Today only a few thousand Jews are still living in Romania. But there will be greater traffic between the two countries. Starting last March Romanians no longer need visas to travel to Israel.
Even before, in 2007, the number of Romanian tourists spending their vacation in Israel doubled compared to 2006. There are around four flights per day between Bucharest and Israel. As well as national air carrier El-Al, Israeli airline Arkia will also start operating between the two states.

Who is Oren David?

Between 2001 and 2007, Oren David was in charge of the Economic Department in the Israeli Ministry of Foreign Affairs. He co-ordinated the economic relationship between Israel with North and South America, Africa and, for a period, Asia. Previously he was a Minister Council in the Israeli mission to the United Nations in New York. Married with two children, David has studied international relations and political sciences at the Hebrew University in Jerusalem and has an MA in European studies.

Property drive

Israeli investments in Romania may increase considerably this year in comparison to 2007. “Only taking into consideration the plans of real estate companies, we see significant growth,” says Yifat Inbar, first secretary and economic and commercial attache at the Israeli Embassy in Bucharest.
Romanian statistics say the Israeli FDI in Romania at the end of 2007 was around 250 million Euro. But this does not take into account, for example, the massive real estate plans of AFI Europe and Elbit Medical Imaging, which collectively will reach billions of Euro in size.
Inbar estimates that the Israeli FDI to Romania is over two billion Euro. Another argument for this larger estimation is that only last year 1,500 Israeli companies established in Romania. However many firms, especially in real estate, do not refer to themselves as Israeli, sometimes for tax reasons. “There have also been moments in the past when, in some countries, companies were boycotted for being Israeli,” Inbar adds.
But Israelis could be more involved on the Romanian market if the Government considered to offer new incentives to foreign investors, especially those intending to make greenfield investments.
Renewable energy and water management are areas where Israeli companies can develop their business in Romania because Israelis are skilled in using scarce resources in an effective way. “We make the most of the sun, which is for free, and we produce electricity,” Ambassador David says. “We do the same with the Earth’s heat and we produce electricity for small communities.” He adds that companies active in these forms of energy capture are showing interest in Romania.
Israeli companies such as Tahal and Solel Boneh want to use their expertise in maximising water at home in water management projects in Romania. “More than 70 per cent of the water used for agriculture in Israel comes from re-used water,” Inbar adds.

AFI Europe:
invest in south capital

South Bucharest has the highest development potential, according to Reuven Havar, country manager of real estate developer AFI Europe. Although the land is not cheap and can cost 1,500 Euro per sqm, easy access to the city centre and the large ex-industrial platforms make the area an appealing zone for developers.
“Almost every building in south Bucharest will be new in the next few years,” says Havar. “We will have a completely new neighbourhood in Bucharest. Pipera will be dethroned in a few years if the infrastructure problems are not solved.”
In this zone AFI Europe is developing ‘AFI Towers’ - 700 apartments in blocks of up to 19 floors on a 1.7 hectare area on the premises of the former Inox factory, near the Parliament Palace. The developer also owns another 25 hectare land plot in south Bucharest which is set for a residential project.
The company will deliver between 10,000 and 15,000 apartments in eight residential projects in Bucharest, Arad and Ploiesti by 2010. ‘AFI Golden Palace’ residential complex in Bucurestii Noi on the plot of the former Laromet factory will be developed by 2011 and will have 4,000 apartments and a shopping centre in a half billion Euro investment, according to Havar. ‘AFI Gardens’ residential project in Pipera will comprise around 2,500 apartments and 5,000 sqm of commercial space, where the company will also make investments in the local infrastructure.
Meanwhile the 220,000 sqm Cotroceni Park, near the city centre, will open by the end of 2009. Besides a shopping mall there will be five buildings to use as offices and one possibly as a hotel.
In Arad and in Ploiesti, Prahova county AFI Europe is working on two shopping centres, both located in city centres and to be delivered by 2010. ‘AFI Palace Arad’ will stretch over 130,000 sqm and will be accompanied by another 14,000 sqm of office space and 700 apartments.

AFI Europe
Real estate

Investments: 1.5 billion Euro by 2018
Projects in Bucharest: AFI Towers
(near Parliament Palace)
AFI Gardens (Pipera)
AFI Village (Baneasa)
AFI Golden City (on Grivita Lake)
AFI Cotroceni Park (Cotroceni)
AFI Golden Palace(Bucurestii Noi)

EMI: hospitality complex
expands on Calea Victoriei

Centre Ville ApartHotel, part of Elbit Medical Imaging (EMI), is building up a solid offering of luxury services on Calea Victoriei, with the addition of the new Radisson SAS Hotel, due to open this month.
Located behind this new five-star hotel, the Centre Ville ApartHotel registered a 8.5 million Euro turnover last year, but the opening of the hotel will contribute another 20 million Euro in the first year of operations, argues Yaron Ashkenazi, general manager of Centre Ville ApartHotel.
The target for the second year is 35 million Euro and 40 million Euro for the third.
The current 170-unit aparthotel complex offers accommodation for foreign business commuters in four-star apartments for 2,000 Euro per month. There are another 60 five-star apartments favoured by senior executives and movie stars in the Elite ApartHotel wing, part of the same hospitality complex. “We decided to double the number of elite apartments by converting another 60 four-star apartments into five-star accommodation,” adds Ashkenazi.

Centre Ville Aparthotel and Radisson SAS
Owned by Elbit Medical Imaging
Hospitality

Employees: 900
Turnover 2007 for Centre Ville ApartHotel: 8.5 million Euro
Predicted turnover of Radisson SAS Hotel in the first year of operations: 20 million Euro

Plaza Centers: One billion Euro
Dambovita Center due for 2012

One of the largest developers of commercial space in Romania, Plaza Centers is constructing a new complex on the site of the unfinished headquarters of the Communist national radio company, Casa Radio.
Recreated as the Dambovita Center on the site of Bucharest’s main river, the size of the project is estimated at one billion Euro and aims to be finished by 2012.
The company’s current total investments nationwide include more than eight projects and more than 1.5 million sqm to be developed by 2012, according to Luc Ronsmans, country manager of Plaza Centers.
The shopping and entertainment centre projects are located in Hunedoara, Iasi, Miercurea-Ciuc, Targu Mures, Timisoara and Slatina. Last March, Plaza Centers and BAS Development announced they will invest almost 300 million Euro in another seven projects in Bucharest, Brasov and Ploiesti.
Given the sub-prime crisis in the United States and its ripples on the international market, the real estate sector has arguably slowed down in Romania because of banks’ restrictions on loans. “Conditions on the financial markets changed as a result of the credit crunch,” adds Ronsmans. “However we believe that because of the quality of our projects, we will be able to find suitable solutions for financing.”
The shopping centre in Miercurea Ciuc will be finished in the second quarter of 2009. At the same time, Plaza Centers will finish constructing a building for the Romanian authorities in Dambovita Center, developed in partnership with the Romanian state.
Every city with more than 40,000 inhabitants is attractive for Plaza Centers. “It is getting harder to buy land in the most important cities in the country, due to price explosions and speculative transactions,” adds Ronsmans.

Plaza Centers
Subsidiary of Elbit Medical Imaging [part of Europe Israel Group]

Real estate developer specialised in shopping and entertainment centres
Eight projects representing 1.5 million sqm to be developed by 2012
Major project estimated at one billion Euro: Dambovita Center in Bucharest

Strauss: rebranding
coffee market leader

Owner of the the Elita and Selected coffee brands, Strauss Romania has finished rebranding its market leading coffee Elite Romania to Strauss Romania. Since the early 1990s Elite Romania has been one of the most consistent investors in Romania and, in the first nine months of 2007, the company held around 43 per cent of total cup consumption of the local roast and ground market.
Since 2004 the company has invested around two to three million Euro per year in the production facilities and offices in Romania. Another three million Euro per year is being invested in developing the brands.
In the Balkans, Strauss has production facilities only in Serbia and Romania. From the local facility the coffee is also exported to Bulgaria, Republic of Moldova and a small amount to Croatia, says Matanya Schwartz, general manager at Strauss Romania.
The company intends to increase its export especially to Bulgaria in the next three years.
However Romanian consumers still lag behind in terms of coffee consumption compared to other countries in the region or western states, says Schwartz. Romanians drink on average just over one cup a day and this is increasing every year by around seven per cent.

Strauss Romania
Coffee producer, retail and HoReCa

Revenue 2007: around 80 million Euro
Brands: Elita, Selected, Fort, Lavazza

Leumi Bank: targeting
cities in south and east

While banks in Romania continue to rapidly expand their branch estate, Leumi Bank will open up to 20 more branches in 2008.
This will boost its estate to over 53 branches with new targets including cities in the south and east such as Slatina, Alexandria, Slobozia, Constanta, Piatra Neamt, Botosani and Vaslui.
“The frenzy of banks’ expansion in Romania has prompted the prices of rents and personnel to rise to a very high level and, in most cases, these costs have nothing to do with reality,” says Laurentiu Mitrache, CEO of Leumi Bank Romania. “Our expansion will be modest. We just want to be in every city of Romania.”
With international banks facing a tough period due to the global slowdown, Mitrache argues that Romania’s banking market will witness a deceleration in growth.
“We are passing through a difficult time,” he says. “I do not think that this year we will see growth of 30 to 40 per cent as in previous years. This situation is new for everybody and people will have to be more prudent.”

Leumi Bank
Assets 2007: 300 million Euro
Profit 2007: 366,000 Euro
Employees: 476
Market share 2007: 0.43 per cent
Predicted market share 2008: 0.72 per cent
Branches open: 38
Branches to open in 2008: between 15 and 20

OCIF Group: searching for
land in Bucharest for offices

Developer OCIF Group is now looking for land in Bucharest city centre for office projects, but is faced with an urban plan that includes an often unhappy mix of residential and office blocks.
“It is a pity that Bucharest does not have an urban plan and the office buildings were erected among old residential buildings, in areas such as Calea Mosilor, Piata Unirii and Piata Universitatii,” says co-general manager of OCIF Group Avner Bar. “The Government should find a way to compensate owners of old and deteriorated houses and allow developers to erect new buildings on these premises. In Israel, in prime locations, developers make contracts with the City Hall to demolish buildings and accommodate the tenants at the developers’ expense in new apartments. Thus they gain approval to build on those land plots.”
By August 2009, OCIF Group will deliver its first residential project, comprising 110 apartments, in the Unirii area, near Parcul Carol, Bucharest to be sold at 2,000 Euro per sqm. The 22 million Euro ‘Vivando Unirii’ project is the first and smallest in the company’s portfolio, which will only include projects of at least 200 apartments in the future.
Avner Bar believes prices will keep increasing at the same rate as the costs of land plots and construction materials have increased over the past few years. “Romania’s market is completely different from all the other eastern European markets, maybe because development here started at a later stage,” says Avner Bar. “While in Warsaw and Budapest the purchase prices increased gradually, in Bucharest the prices doubled year on year. More Romanians can afford to buy dwellings as the wages keep increasing, so it is only natural for developers to increase the prices on apartments.”
OCIF Group has just acquired a nine hectare land plot in Pipera, near the American School, where it plans to develop a residential complex this year.

OCIF Group
Real estate developer

Established in Romania in 2006
¦ Projects: Vivando Unirii, located in Piata Unirii

Aura Development: targeting
residences in Brasov and Snagov

Israeli real estate company Aura Development has budgeted 260 million Euro for investments in projects this year. The company will start in a few months the development of a residential complex in Brasov, in an area that overlooks the mountains and the city centre. ‘Primavera Valley View’ complex will cover 73,000 sqm and will include around 1,700 luxury apartments delivered in five phases by 2013.
The developer has also purchased a 25,000 sqm land plot in Snagov, Ilfov county, where it plans to erect a 200-apartment complex by 2009, ‘Sun Valley Residence’, in a 24 million Euro investment.
This year Aura Development will deliver three of its seven Galleria Shopping centres developed in partnership with Warsaw-listed company GTC in Buzau, Piatra Neamt and Suceava. “Our target is to develop around 20 shopping centers throughout Romania,” says Tomer Saliah, VP business development at Aura. Near the shopping centre in Piatra Neamt, Aura Development is also erecting 230 apartments, in the 18 million Euro ‘Green Hills’ complex, of which 40 have already been sold. The company will develop another 600 apartments in Piatra Neamt, starting this year.
Aura Development is also targeting the office building market, with two projects in Ploiesti, Prahova county and Brasov, expected for delivery by 2009. In Ploiesti, the developer will start in nine months works on a 385 residential units project. ‘Primavera Acacia Park’ is located on Strada Trei Ierarhi Street over 18,500 sqm.

Aura Development
Real estate developer

Projects to be delivered in 2008: Galleria Shopping Centers in Buzau, Piatra Neamt and Suceava.
Investments in ongoing projects: 200 million Euro

Mainrom Line: exploiting
Danube transport corridor

Transporting containers on the Danube for over a year, Mainrom Line is now planning to extend the capacity of its container terminal in Giurgiu, says president of Mainrom Line group Orit Rishpi Lavi.
Mainrom Line group includes business in a shipping line, trucks, storage and warehousing and operates the container terminal in Giurgiu.
The company transports goods, mostly in containers on a weekly basis between Constanta and Giurgiu and on to the west on the Danube or in the direction of Bucharest and to other destinations in Romania or internationally.
The company has two offices in Bucharest and Giurgiu and plans to open a service centre in Timisoara in a few months.
Mainrom Line is also opening a new container terminal in Giurgiu which will enable the group to expand its capacity. “With the EU policy of strengthening the use of inland waterways, both the port and the logistics centre are more attractive than ever before,” says Rishpi Lavi.
Mainrom Line plans to open a regular shipping line between Giurgiu and Vienna, once the Romanian Government rehabilitates Danube’s water bed.
A major issue for shipping lines is Romania’s calculation of channel fees. In west Europe the fees are calculated on the basis of volume of cargo, whereas in Romania this is based on the total tonne capacity of each barge. “This policy is holding back the huge flow of cargo looking for alternative routes,” Rishpi Lavi adds.

Mainrom Line
Shipping line group

Three offices in Bucharest, Giurgiu and Timisoara
Employees: 50
Total investment: ten million Euro

Tnuva: plans to double
portfolio by end of 2008

Since entering the market six months ago after four years of planning, Tnuva Romania has launched 16 new dairy products, a portfolio which it plans to double by the end of 2008.
“We wanted to establish very quickly and very solidly on the Romanian market, but we are not in a race,” says Sagit Tzur Lahav, vice-president and marketing manager at Tnuva Romania.
As the largest food company in Israel, Tnuva identified the Romanian market as one of huge potential in the dairy sector, where it has built a dairy factory in a greenfield investment in Popesti Leordeni and renovated a dairy farm in Adunatii Copaceni, both close to Bucharest.
Now the company has around 400 employees and invested 55 million Euro in its local production of yogurt Yoplait and Tnuva own-name brands in cream and yogurt. Romanian consumers are still trialling the products, but the company’s massive advertising campaign is building huge awareness.

Tnuva Romania
Dairy company

Products: 16
Plan: to launch 16 new products by the end of 2008
Investments: 55 million Euro

Sixt New Kopel:
operational leasing leader

Operational leasing firm Sixt New Kopel is now the leader on the Romanian operational leasing market, according to Dudy Perry CEO of the company. This year the company plans to expand its car-fleet from 4,500 cars to 7,000-8,000 cars.
Perry believes the potential of the Romanian operational leasing market is large, but will need time to fully develop.
“More people are coming to Romania, but unfortunately infrastructure, prices and services are not so good here,” argues Perry. “There are some investments in motorways and infrastructure and, if leisure tourism is better promoted, more people would come here because Romania has great potential.”
In 2007 the operational leasing division of Sixt New Kopel closed contracts with a total value of about 40 million Euro.

Sixt New Kopel
Operational Leasing and
rent-a-car

Ranking in sector: leader
Market share: 30 to 35 per cent
Branches: 11 including Cluj-Napoca, Sibiu, Brasov, Constanta, Iasi, Bacau, Timisoara
Branches to open in 2008: up to four

Ludan Engineering: focusing for
2008 on refinery and environment

Focused on the petrochemical, refinery, chemical, food and beverage, power and environmental activities, engineering services company Ludan Engineering has witnessed a steady growth over the last few years.
“Approximately every year our turnover and number of employees doubled and this year we are hoping to see an increase of at least 50 per cent,” says Arnon Aharon, general manager of Ludan Engineering.
In December 2007 Ludan finished implementing a new technology, Lextran, at CET Iasi, which treats contaminated fuel gases from power stations and fuel-burning plants. This new technology will help reduce operational costs, argues Aharon.“Our main activity for the Romanian company in 2008 will be refinery and environmental activities,” he adds.
Last February the company also opened a subsidiary of Ludan in Bulgaria.

Ludan Engineering Romania
Engineering services company

Turnover 2007: seven million Euro
Predicted turnover 2008: ten million Euro
Employees: 70

Baran Romania: rehabilitating
regional infrastructure

Provider of engineering, technology and construction services Baran Romania has renovated RAFO Onesti oil refinery in Darmanesti, Bacau county, as well as the western part of the ringroad in Ploiesti. The company also rehabilitated the tram-lines in Iasi and is now working on two major projects - the renovation of the municipal hospital in Constanta and the construction of a factory in Drobeta Turnu Severin, Mehedinti county.
Baran becomes involved in most kinds of project with one exception. “We want to build a long-lasting relationship with our clients, so we don’t do residential because this is a one shot deal,” says Sharon Zaid, general manager at Baran Romania.
Zaid did not want to disclose the value of the contracts, but valued all these projects at around a few 100,000s Euro. “We are working to submit a master plan to a county council to rehabilitate its sewerage and water supply under EU regulations taking care also of obtaining the European financing needed for the authorities to pay,” he explains.

Baran Romania
Engineering, technology and construction services

Projects finalised: renovation of RAFO Onesti oil refinery in Darmanesti; part of Ploiesti ringroad; tram line in Iasi
Employees: 35

Clal: not ruling out acquisitions

After two years in Romania insurance company Clal Romania is still running without a profit, although the company expects to double its turnover in 2008.
“When you start up a green-field insurance business you cannot expect to register a profit in less than four to six years,” says Valentin Tuca, general director of Clal Romania.
For now the company will focus on consolidation and making Clal known in the insurance market as a strong brand.
“We want to be in the first league and maybe eventually the leaders of the Romanian insurance market,” says Tuca. “We do not exclude the possibility of making some acquisitions or to associate with some strategic partners to help us reach that target in the near future.”

Clal Romania
Insurance company

Turnover 2007: 1.8 million Euro
Predicted turnover 2008: 3.5 to four million Euro


 
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