Channeling forces to make best use of funds
Exploiting EU funds with a coherent economic policy ensured that Portugal seized the opportunity of membership to trigger growth
Since Portugal joined the EU club in 1986, the country experienced a political and social commitment to develop the country with all the stakeholders focused on maximising the best use of European funds available.
On 1 January 1986, the GDP per capita in the Iberian country was half the European average. But in its two decades of membership, Portugal registered a constant annual growth of three per cent per year and now has a GDP per capita three-quarters of the European average.
“The first ten years that followed the EU accession were a successful evolution for Portugal, with all economic and political forces focused on organising and improving the country’s potential,” says Portuguese Ambassador to Bucharest Alexandre Vassalo.
Portugal’s economic policy focused on deficit reduction, exchange rate stability, inflation control and structural reforms, including a long privatisation programme and heavy investments in infrastructure. “The Government identified the most profitable areas to gain the economic stability needed while important investments, both foreign and domestic, were made in the right directions,” says Vassalo.
There is a similarity betweeen the history of Portugal and Romania, with both states moving from dictatorship to revolutions, democracy and EU reform. “One of the best policies was the way we took advantage of the EU funds and how we decided to use them with success,” the ambasador says.
Portugal is blessed with fantastic beaches and the country made a special effort to build up its tourism infrastructure. “Creating the required qualification, such as training and schools in tourism, and improving the railway and road infrastructure are solutions to turn around the deficit in Romanian tourism,” Vassalo says.
In Romania the Portuguese are mostly interested in investing in IT, pharma, banking, consulting, real estate, energy and renewable energy. “However the dominating presence is in constructions, because Romania needs work on its infrastructure and Portugal is very qualified in this sector,” says Vassalo.
Last year, Portugal ranked 26th in terms of FDI in Romania, with almost 52 million Euro. “This is a little modest,” the Ambassador says, “but this year the Portuguese direct investments in Romania will increase considerably.”
Due to the fact that Portugal’s economy has slowed down in recent years, Romanians working in the Iberian country have dropped from 80,000 in 2006 to around 60,000 now.
Generalcom: high taxes on workforce compared to Portugal
General manager of Generalcom Alain Bonte has a wide range of business interests in Romania from pharmacies to leasing and real estate rentals.
Bonte believes Romania has improved its business legislation, but there continues to be a high taxation on workers. In Portugal the total tax burden for the labour force is 50 per cent of the salary, while in Romania this is 80 per cent. “These taxes should be reduced,” he adds.
There is also a major problem with Romania’s trade deficit, which is reaching record levels. “The Romanian market is dependent on imports and the state should encourage greenfield investments by giving incentives,” he says.
As president of the newly-created Portuguese-Romanian Chamber of Commerce, Bonte says that his compatriots are mainly interested in investing in Romania in banking and finance, constructions, car components, energy, services and retail.
Listed on the Bucharest Stock Exchange, Generalcom is a company specialised in letting commercial spaces in Bucharest, but with a mixed interest portfolio. This company owns a majority stake in Centrofarm, one of the oldest Romanian pharmacy brands with 38 stores, 80 per cent in Bucharest. Generalcom also acquired traditional medicine chain Plafar in 2007. This is another famous Romanian brand with 80 years on the market and a turnover last year of under a million Euro. The plan this year is to grow this to between two and three million Euro.
Letter of commercial spaces
■ Companies: Pharma producer Sintofarm Bucuresti
■ Pharmacy chain Centrofarm
■ Traditional medicine chain Plafar
■ Total Leasing
■ Minority shareholder in Global Asigurari
Sonae Sierra: half-billion Euro project for south Bucharest
Portuguese real estate developer Sonae Sierra will pour around 900 million Euro in the development of three shopping centres in Craiova, Ploiesti and Bucharest and is targeting three more projects for the end of the year.
The company has recently set up a joint venture with Irish developer Caelum Development to build a mall in southeastern Bucharest, scheduled to open in April 2011. The 591 million Euro Parklake Plaza will be located on Strada Liviu Rebreanu and will cover 110,000 sqm.
Last month the company started building its first shopping centre from scratch over 55,537 sqm in Craiova. Sonae Sierra is also working on gaining the permits for the development of its second mall, in Ploiesti, near the road to Bucharest.
“We expect the building permits later this year,” Ingo Niessen, managing director at Sonae Sierra, told The Diplomat. This 64,070 sqm building is set for delivery by 2010.
Sonae Sierra entered the Romanian market through the purchase of River Plaza Mall in Ramnicu Valcea, Valcea county. The developer also has an agreement to manage Arena Mall in Bacau.
“We will invest in the management or expansion of shopping centres developed by other companies, only if we see growth potential,” says Niessen.
Shopping centre developer
■ Projects: shopping centres in Craiova, Dolj county; Ploiesti, Prahova county; Parklake Plaza mall in Bucharest in partnership with Caelum
Millennium Bank: starting out with aggressive strategy
Launching universal banking services in Romania last October, Millennium Bank is aware of the local competition and decided for an aggressive expansion policy with 41 branches opening in cities such as Bucharest, Brasov, Constanta, Iasi, Timisoara and Oradea.
“When we decided to start a greenfield business in Romania we came quickly to the conclusion that we are a bit late,” says Jose Toscano, general director of Millennium Bank. “Most of the banks have been here for a number of years. They have a strong know-how and experienced personnel.”
The initial investment made by Millennium Bank has reached 40 million Euro and, by the end of 2011, the bank plans to set up 100 branches with a total investment reaching 300 million Euro. Millennium does not plan any takeovers in the near future.
“For the moment we are quite small and I do not think that other banks are worried about Millennium Bank but we plan to be efficient, to anticipate the moves on the market and, in the end, to increase our market share,” adds Toscano.
■ Employees: 500
■ Branches: 41
■ Planned number by end of 2011: 100
Lena Construcoes: finishing passage near Obor in August
Portuguese company Lena Construcoes, which specialises in design, construction and management of public and private works, will complete this August the infrastructure works on the viaduct above the railway between Strada Doamna Ghica and Blvd Chisinau in Bucharest near Obor train station.
At the moment, the viaduct above the railway is almost finished and the pillars are ready. “Technically, we will be able to conclude the project on time, by 1 August 2008,” says Armindo Silva, managing director Lena Construcoes. “We experienced some difficulties related to the expropriation of the owners in the area which delayed the process.”
Lena Construcoes is also working on the underground road passage of DN1, located at the crossing between Blvd Ionescu de la Brad and Blvd Aerogarii. The company also plans to start work in civil construction and to invest in real estate. The targeted locations are the north of the country and Bucharest.
Mota-Engil: targeting motorway concessions
Constructor Mota-Engil is entering the tender this year for the concession for 30 years of the 108 km Comarnic-Brasov section of the Bucharest-Ploiesti motorway in partnership with other Portuguese companies including Brisa, Soares da Costa and MonteAdriano.
“We try to focus more on big projects, rather than on small ones, because the amount of work is the same,” Carlos Mendes, general director of Mota Engil Romania.
Mota-Engil Group will deliver four real estate projects on the Romanian market by 2009. The company in partnership with Romanian construction company Bog’Art is the main contractor of Romfelt Plaza residential park, including 616 flats in Bucharest’s Colentina area.
By December 2009, Mota-Engil will finish work on the 25 million Euro Lake View Office Building, located in Bucharest on Blvd Barbu Vacarescu. This July the company will start building the foundation and structure of 34.9 million Euro Craiova Mall centre, developed by Portuguese Sonae Sierra.
Mota-Engil will also build the infrastructure of the Nusco Tower office project, located in Blvd Barbu Vacarescu. The Portuguese company is involved in the construction of a Government-funded flyover and access road over the railway line Bucharest-Constanta in Pipera.
■ Divisions: Civil Engineering & Building Construction, Environment & Services, Transport Concessions, Industry & Energy
Soares da Costa: bidding for Brasov motorway
Portuguese construction company Soares da Costa will start this year infrastructure works on two roads in the counties of Alba and Teleorman in a total estimated value of 16 million Euro.
The first rehabilitated road, built between Alba and Mures counties, is 40 kilometres long, while the second, between the towns of Videle and Milcovatu, Teleorman county, covers 20 kilometres.
Soares da Costa is part of the consortium bidding for the construction of Comanic-Brasov section, part of Bucuresti-Brasov motorway, including Portuguese infrastructure companies such as Brisa, Mota-Engil and MonteAdriano.
The Group is also building a ring road in Lugoj city, Timis county, in a project worth 21 million Euro. In addition, the company has won a 42 million Euro public tender for the development of the water supply and sewerage system in Galati.
“For the time being the company is present only with the construction division, but we will consider the possibility of approaching the real estate sector in the future,” Paulo Sousa, branch manager at Soares da Costa.
Soares da Costa
Civil construction and public works
■ Forecast turnover for 2008: 45 million Euro
■ Divisions open in Romania so far: construction
By Ana Maria Nitoi, Alexandra
Pehlivan and Corina Ilie